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Will Queensland bring Turnbull down?

Peter Switzer
19 May 2016

By Peter Switzer

I’m off to Brisbane today to do a speech for the Real Estate Institute of Queensland, so I thought I should look at the election battleground state from an economic point of view. Please don’t think, however, that I’m getting sucked into the election euphoria of my Sky News colleagues, which they have to sustain for another 44 days!

No, I see Queensland as a crucial economic story, which could help or hinder the overall Oz economy to achieve better-than-expected growth than was predicted in the Budget. The Treasurer has us growing at 2.5% in 2015-16 and the same for 2016-17. I think these growth numbers are on the low side.

Like me, the Reserve Bank is more bullish, seeing this calendar year at 2.5%-3.5%, which is around half a per cent higher than previous forecasts. Meanwhile, growth of 3-4% is expected into June 2018 – in line with its prior forecast. If we average the two years, we get 2.75%-3.5% and I hope the RBA can trump Treasury on those numbers.

(Doesn’t the word “trump” have a special meaning nowadays, with Donald trumping his justified haters to date?)

Considering the economic importance of Queensland, the question is: is it a case of ‘beautiful one day, perfect the next’? Or is it more like ‘OK today and getting better the next’?

Clearly, if Queenslanders feel economically beaten, it might not be good for the Government in Canberra and the banana benders certainly can make politicians pay for hard hip pocket times, as Campbell Newman learnt after one term as Premier!

Politically, Queensland is a battleground state, with 12 of the state's 30 seats hovering on margins under 5%.

If Queensland is economically unhappy, then Labor could pick up half the number of seats it needs to form Government. 

The mining boom’s disappearance has hurt the state but a lower dollar is good for tourism and education, which the state sells. To me, however, it looks like it’s in a transition so this election might be too early. I always wanted an end-of-year election because I thought the economy didn’t need the negatives that come from an election, but Malcolm ignored my pleas.

Help is on the way with the lower dollar and over two and a half years there have been over $550 million in projects that are either built or in the pipeline, which should underpin an improving economic story.

So what does the state look like with the election looming in just over six weeks? Look at this summary:

  • The NAB business conditions reading fell 10 points in Queensland, while they fell 1 point in NSW from high levels. This says business isn’t great in the north right now.
  • However, the same NAB survey found firms in Queensland are most confident, while confidence remained negative in WA (despite improving), so business in the north is starting to feel more optimistic.
  • The April jobless rate went to 6.5% from 6.2% in March, while NSW stayed at 5.3%, so that’s a story that needs to improve for Queensland, with 5,600 jobs lost. (Generally, the fact that the national unemployment rate is holding at 5.7% (the lowest levels in 2½ years) will provide a big boost to confidence amongst Aussie consumers, so Malcolm would love to see the May numbers delivered in June to show Queensland is getting better, jobs-wise.
  • Annual wage growth in NSW was 2.1%, Victoria 2.4% but Queensland was 1.9%, while WA was 2%. This won’t make voters up north pro-Coalition.
  • The Westpac/Melbourne Institute index of consumer confidence rose by 8.5% in May to 103.2, after sliding by 4% in April. 
  • The State’s Treasurer, Curtis Pitt, says “Queensland is still forecast to have the fastest growing economy next financial year and Queensland business confidence has remained the highest of any mainland State for 10 months in a row since last year’s State Budget, according to the National Australia Bank’s Monthly Business Survey.”
  • On consumer sentiment, he says: “The latest consumer sentiment result of 96.7 on the Westpac-Melbourne Institute index is 3.9% higher than when the LNP left office in 2015.” While that’s true, the national reading of consumer confidence is at 103.2, so the state’s shoppers are not excessively happy campers, just yet.
  • Dwelling starts is a very good story in Queensland, with the December quarter showing a 4.9% rise, while NSW was up 1.6%. It was the best result for the country and adds to optimism, as building work has a strong multiplier effect.
  • This morning, the Oz dollar is at 72.24 US cents and a lower dollar is good for a state that sells exports, such as tourism and education. It’s still selling mining products but just at lower US dollar prices.

I think the Queensland economic story is on the improve, even if the State Treasurer might be gilding the lily a little. However, the current story still looks a little threatening for Malcolm Turnbull. A later election might have been better for collecting more northern votes.

And remember, the north has been attracting retirees like bees to honey for decades and there are probably a lot of very cranky superannuation pensioners, who might be questioning their loyalties to the Coalition right now.

On the flipside, Queensland has grown on the back of investment and construction linked to negative gearing, so Labor could be a challenge for investors relying on this tax-effective strategy. However, there is one important point that needs to be remembered — a lot of the investors who own Queensland negatively geared properties actually don’t live in Queensland!

This battleground state could be Malcolm’s Waterloo, if the economic data doesn’t keep improving and those super changes keep retirees hopping mad.

I think the north could be a real worry for the Turnbull family on election night. It could be beautiful on the day of July 2 but quite imperfect the next!

If you liked this article you'll love the Switzer Report, our newsletter and website for trustees of self-managed super funds. Click here for a FREE trial and to hear more of Peter’s expert commentary and advice.

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