Queensland economic outlook June 2023

Queensland’s labour market has shown signs of a turnaround, but CEDA Senior Economist Andrew Barker says there are structural reasons to expect that skill shortages will persist.

In an address in Brisbane on Thursday, Mr Barker said that although unemployment is low, it has begun to creep up in recent months.

He predicted labour shortages will continue to ease as inflation starts to curb spending habits.

“High inflation and rising interest rates are creating a cost-of-living crunch, reducing household spending and economic growth,” Mr Barker said.

“This has already seen job vacancies fall and employment growth moderate.

“The trend is set to continue as interest rate rises are fully transmitted through the economy and household budgets remain stretched.”

In the housing market, Brisbane’s affordability advantage has reduced, with median dwelling values catching up to Melbourne in the post-COVID boom.

Mr Barker said house prices in Brisbane have weakened recently but are still up 27 per cent since the beginning of the pandemic.

The rental market has also experienced low vacancies and large growth in rents.

“Rental vacancies have been low at close to one per cent since early 2022, driving over 20 per cent growth in advertised rents,”  he said.

The recent state budget predicts three per cent gross state product (GSP) for the next two years, almost double the national forecasts.

“Economic growth in Queensland has outpaced the rest of the nation over the past couple of years, driven by strong interstate migration, household spending and growth in primary production,” Mr Barker said.

“The Queensland government forecasts this overperformance to continue in 2023-24 as a rebound in international tourism and education supports strong export growth.”

However weak productivity performance, geopolitical tensions and barriers to trade pose risks to this rosy outlook.

“In this context, it makes sense to prioritise investment for the future,” he said.

Mr Barker cited the 15 hours of free kindergarten, investment in social housing and the $19 billion to deliver the Queensland Energy and Jobs Plan as positive initiatives that would boost the outlook. However, better targeting of handouts could bolster the budget bottom line.

“The bulk of $1.6 billion in new and expanded cost-of-living measures will be spread evenly across all Queensland households in the form of a $550 Cost of Living Rebate,” he said.

“Better targeting support to the most vulnerable could have provided more help to those who really needed it or freed up some revenue to improve the fiscal situation.”

Mr Barker said Queensland and other states will continue to benefit from the rebound in service exports as international travel recovers.

“In particular, tourist arrivals were still down on the pre-pandemic level by more than 20 per cent as of April, while international student numbers continue to recover,” he said.

“There are a number of looming challenges and opportunities for Queensland around global developments, rising interest rates, the energy transition, and the need for more infrastructure and housing for a growing population.

“The government’s foresight to introduce new higher price tiers for coal royalties has delivered substantial revenue; the challenge now is to invest that money wisely to meet the challenges ahead.”