North west economy promising outlook

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Font Strategic Partner, Paul Arnold gives his views on Tasmania’s north west economy

 

Businesses and industry on Tasmania’s north west coast are thriving, yet the economic conditions making this happen appear to be influenced by external market forces such as the Aussie dollar and overseas investment interests.

However, falling short is the mining industry on the north west coast, which has taken a hit in recent months due to international commodity prices. This has impacted heavily on local prospects, but many of us observing this have been around long enough to recognise that the worm will turn and mining will again rise to be the great economic contributor.

The next step for the Tasmanian mining industry is to re-manage the difficult and time-consuming approval processes, as we are still to take advantage of the depth of untouched resources available in our state. On a positive note, the fall of the Aussie dollar will strengthen the business case for many mines to either start up or re-open, and the mining industry will continue to be an economic strength in Tasmania for many decades to come.

The forestry industry continues to surprise us all, as new owners begin the onerous task of refiring past customers and markets. Hopefully the new ownership of Hampshire Woodchip will see the plant resume full production within a few months so harvesting can continue.

Despite political disputes, woodchip production is busy growing and is a major asset for the state. The fall in the Aussie dollar will generate significant demand for the immense resource and the stability of a majority government should enhance the investment climate, allowing long term contracts to be established again.

This is an amazing turnaround from a few short years back, recalling on the timber receiverships that did the economy no favours. However, the new owners of the Hampshire Woodchip plant seem to have hit the ground running.

Agriculture is in a season of positive outlook, with new potato contracts, incredibly popular beef that is now attracting premiums in some markets, and excellent dairy returns, producing favourable prospects for the future.

It has been a long held view that our food production is world recognised for its high quality and value, rather than just another commodity product on the world stage, and accordingly there are prospects for record returns for premium beef products in coming years.

The worlds demand for our food production will influence Tasmania’s approach to agriculture for decades to come. This market outlook will create demand for more land to be converted to beef production; something that would have been unheard of in recent years. It is firmly believed that agriculture will continue to rise in its influence on Tasmania’s economic future, and the case now exists to free up lots of unutilised land for higher and better agricultural use.

Tourism has had an amazing recovery from the doldrums of recent years and it is pleasing that this recovery is extending to the regions, including north west Tasmania.

Our hospitality industry has a long way to go and training and skill development will be required if we are to meet the future potential of this growing industry. Penalty rates are also a major inhibitor for business to invest the right funds for the opportunities that are presenting themselves.

Building and construction industries in the north west seem to be missing out on the boom currently being experienced in the south of the state. New buildings seem to be a great indicator of things to come and we have all experienced the boom created by the global financial crisis.

Unfortunately construction firms naturally build their workforce to cope with the boom times, only to have to make difficult choices when the industry backs off. It is to be hoped, that the changes to the Planning System, currently under discussion, will encourage a growth spurt in housing and construction. Also, the current prevailing interest rates present opportunities not previously experienced for many years.

The world of retail is changing at such a fast pace that it is difficult to see how the empty shops will be refilled. The informed purchaser has too many options to buy retail goods with the realities of the internet, and the past loyalties of shopping locally are not being embraced by the emerging shoppers.

Accordingly, retail in the north west remains subdued, in spite of a healthy Christmas trading season. However, smart retailers are changing their management operations to have some excellent internet presence, and I am amazed at the number of retail shops that are prospering in this environment. It’s hard to imagine what our city and town streetscapes will look like in 10 years’ time.

Investor confidence in Tasmania is growing. The visit by the Chinese President, Mr Xi Jinping, to Tasmania in November has sparked a frenzy of potential investment in Tasmania. The frenzy has not translated to much actual investment at this time, however, the potential for hundreds of millions of dollars, still remains.

The challenge we have is to tap into the billions of overseas investment dollars. My experience in Asian investment highlights that we are quite unprepared for what the investors are looking for.  We have lots of great ideas, but no prospectus’ that make it easier for investors to commit. Therefore, until we get the right prospectus development model right, we will continue to miss opportunity after opportunity.

Perhaps right sized councils will allow proper resourcing of the economic investment potential of each area. In my view, all councils need to have a capacity to develop prospectus to accommodate the enormous opportunities in their areas, with capable staff to assist development opportunities.

 

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