2018-19 Budget Paper 1 - Chapter 2 - Tasmanian Economy
2Tasmanian EconomyKey IssuesFavourable local and external conditions are supporting the Tasmanian economy, with state final demand growing at above national rates and global growth prospects improving. The outlook for economic growth and employment is positive, with this momentum expected to be sustained over the mediumterm. Tasmania’s economic growth is expected to be 3??per?cent in 2017-18, well above the longterm trend, followed by 2??per?cent growth in 2018-19. The tourism sector continues to be an important contributor to the improved economy. Further growth in visitor numbers and spending is providing employment opportunities across the State and is attracting investment in tourism accommodation.Above trend population growth and high employment levels are contributing to a buoyant housing market in Tasmania, with house price growth among the highest in Australia, exceptionally strong demand for rental accommodation and a positive outlook for dwelling construction, especially in the Greater Hobart area. Business confidence in the State remains high and the recovery in business investment continues, with investment in machinery and equipment increasing sharply in recent quarters. Several major new projects are planned or underway, including in the renewable energy industry. Tasmania’s exporters are benefitting from very favourable commodity prices and international trading conditions, which has resulted in very strong growth in export earnings, especially for nonferrous metals, seafood and meat products. Employment levels are close to the recent series peak after very large increases in 2017. Further modest growth is forecast over 2018-19. Over 2017-18, employment is expected to grow very strongly by 2??per?cent. Employment growth at the longterm trend rate is forecast through the year for 2018-19, and is consistent with around 2?300 more persons employed in June 2019 than in June?2018. Whilst Treasury does not provide labour market forecasts for the period of the forward estimates, employment growth of 9 300 from July 2018 to June 2022 would correspond with longterm trends for the outyears. The unemployment rate is expected to remain around current levels, due to increased labour market participation, with 6?per cent expected for 2017-18, 2018-19, and the outyears.Population growth is currently above the longterm annual trend at around 0.7?per?cent and is expected to remain at this rate in 2018-19, providing further support to housing demand and state final demand more broadly. Inflation continues to be subdued and interest rates are expected to remain very supportive, though there are some drivers for moderate increases in the inflation rate in the near-term, including higher fuel prices. Hobart’s inflation is estimated at 2?per?cent for 2017-18 and slightly higher at 2??per?cent for 2018-19. There may also be some upward pressure on market interest rates in the mediumterm. Wages growth continues to be on a par with national levels for both the public and private sector, and any increases are expected to be modest. Tasmanian Economy Estimates, Forecasts and ProjectionsThe table below shows Treasury’s estimates for key Tasmanian economic indicators for the 201718 financial year, forecasts for 201819 and projections from 2019-20 to 202122. Table 2.1:Estimates, Forecasts and Projections1Budget 2018-192016-172017-182018-192019-202020-212021-22ActualEstimateForecastProjections3Gross State Product (real, % change)1.13?2? 222State Final Demand (real, % change)21.833?2?2?2?Employment (year-average, % change)0.52??111Labour Force Participation Rate (year-average, %)60.26161616161Unemployment Rate (year-average, %)6.166666Consumer Price Index (year-average, % change)1.822?2?2?2?Population (year-average, % change)0.60.70.70.60.60.6Source: Actual - Australia Bureau of Statistics; Estimates, forecasts and projections - Treasury.Notes:Based on Labour Force data (ABS?Cat?No?6202.0) for April 2018 and National Accounts data (ABS?Cat?No?5206.0) for the December?quarter?2017.The result for state final demand in 2016-17 differs from that published in the 2017-18 Revised Estimates Report due to revisions in the published ABS quarterly National Accounts data.The projections are not forecasts, but are based on the longterm averages for the economic indicators. In the case of the labour market, the projections of employment growth reflect the longterm trend. The projections for the unemployment rate and the participation rate are developed using prevailing rates, projected growth in the working age population, projected employment growth and the historic relationship between employment growth and labour market participation.The estimates and forecasts rely very heavily on the official data produced by the Australian Bureau of Statistics. Concerns remain over the reliability and volatility of some of the key data for Tasmania, including data relating to the labour force and gross?state product and its components, including interstate and international trade. Treasury’s gross state product forecasts are constrained by the lack of quarterly data at the State level on factor income and on output by industry. Treasury is therefore required to rely entirely on ABS data on the expenditure components of state final demand, which can be subject to major revisions. This can result in major reassessments of past economic trends and potentially significant changes to the economic forecasts. Recent TrendsGlobal EconomyGlobal economic conditions have improved over the past year and global economic forecasts are generally positive. After a period of weak investment growth by advanced economies and a reduction in investment by some commodity-focused developing economies, global investment recovered in 2017 and international trade continued to expand. The International Monetary Fund estimates that the global economy expanded by 3.8?per?cent in 2017 and expects growth of 3.9?per?cent in 2018 and in 2019, which are all above the longterm trend.As in the past decade or more, the emerging and developing economies, in particular China and India, are expected to be important contributors to global growth, which will continue to benefit Tasmanian producers given that a large share of Tasmania’s exports are directed to these markets, particularly China. China has been imposing greater restrictions on certain industrial processes in response to environmental concerns, which has prompted reduced importation of morepolluting raw materials and increased demand for higher quality and more refined products. This favours Australian, including Tasmanian, producers due to the quality of ores and metals produced domestically. An important advantage to Tasmania of the sustained growth in China and other emerging and developing economies in Asia is the growth in tourism due to rising household income. The number of international students has also been increasing and when they receive visits from their families, this further boosts visitor numbers to the State. This has made a major contribution to Tasmania’s tourism sector in recent years. The positive outlook for these economies indicates that this trend is set to continue. Global interest rates and inflation remain at historically low levels but there is some modest upward pressure and increases are expected over the mediumterm. The US economy has been growing strongly, reaching a stable low unemployment rate and capacity utilisation levels that are leading to a tightening monetary policy by the Federal Reserve. The interest rate for ten-year US Treasury bonds has also been increasing, and is now around three per cent. Labour markets have been improving in advanced economies, leading to some expectation that the period of very low wages growth may soon be over, particularly if the demand for skilled labour remains high. Increasing fuel prices and some other key commodity prices are also putting some further upward pressure on global inflation. National EconomyNational economic conditions continue to improve, supported by recently increasing household spending and a recovery in private investment, especially non-mining business investment. The Australian Treasury is forecasting economic growth of three?per?cent in 2018-19, above the average growth of 2??per?cent over the past decade. The effects of the winding down of mining investment are largely over, which had been constraining national economic growth. National labour market conditions are strong, with record growth in trend employment in 2017 of 407?000?persons, of whom just over three quarters were in full-time employment, and an increasing national participation rate. National household spending has been increasing, supported by falling household savings. National household debt has been increasing sharply and is now at a high level, relative to household income. The Reserve Bank of Australia expects wages growth to remain low for a little longer, before increasing over time due to a strengthening national economy.Currently, national dwelling investment has been easing and house price growth has slowed in Melbourne, while house prices are falling from very elevated levels in Sydney. Despite this, growth in building approvals remains positive and the Australian Treasury is forecasting a return to modest growth in dwelling investment in 2018-19 and relatively steady levels in following years. The benefits of the mining investment boom are now being demonstrated in Australia’s export performance. There has been sustained volume growth in resource commodities, at around five per cent per year, such that by 2019-20 the volume of mining-related exports is predicted to be twice the level immediately before the investment boom. Together with stronger commodity prices, this is providing very encouraging conditions for the nation’s resource exporters, and also gains in the terms of trade, which is expected to boost real national income in 2017-18. The Australian Treasury is not expecting these commodity prices to be sustained, and is forecasting an easing in the terms of trade from 2018-19 to 2021-22. The Reserve Bank of Australia continues to hold interest rates at historical lows as inflationary pressure remains subdued. Underlying national inflation is currently running just under two?per?cent and the RBA’s most recent forecasts are for CPI inflation to be a little above two?per?cent in both 2018 and 2019.Tasmanian EconomyThe Tasmanian economy has performed well over the past year, with employment growth in most regions of the State and total employment currently just under the series peak reached in late 2017. Two key drivers are the return to growth in business investment and the continued growth in visitors to the State, particularly tourists, which has benefitted hospitality-related industries. Other industries to enjoy positive conditions include several areas of agriculture and some specialist manufacturing. Tasmania’s forestry-related industries are also experiencing a recovery, with improved prices, increased exports and the development of new processing plants, including the recently announced Hermal plantation timber mill and production facility in the State’s North West.Tasmania’s aquaculture industry is also set for further growth, with several major new projects under consideration which could potentially double the State’s salmon output over the next 12 years. One indication of the strength of the Tasmanian economy is that the favourable labour market conditions occurring here have ensured net interstate migration into Tasmania has been positive. This suggests there have been sufficient employment opportunities in the State to prevent large levels of out-migration to mainland Australia as has occurred in the past when labour market conditions were more buoyant on the mainland. This has contributed to above trend population growth in recent quarters, which has further supported demand and economic activity in the State. State final demand is growing at above the national rate, supported by household consumption, business investment and elevated levels of public investment. For 2017-18, growth in state final demand is estimated at three?per?cent, a large increase from 1.8?per?cent growth estimated by the ABS for 2016-17. Stronger growth is forecast for 2018-19, at 3??per?cent, which includes an increase in dwelling investment. Together with spending in Tasmania by interstate and international visitors, which is not included in state final demand, overall domestic demand in Tasmania is expected to remain buoyant in the mediumterm. Gross state product, is estimated to grow at 3??per?cent in 2017-18, well above the longterm trend and the strongest growth rate since 2007-08. This growth is driven largely by increased activity in Tasmania’s international export sector. For 2018-19, gross state product growth of 2??per?cent is forecast, with contribution primarily from increasing domestic demand, reflected in a higher growth rate for state final demand in 2018-19 than in 2017-18. ConsumptionIn recent quarters, Tasmanian household consumption growth has been above trend and has exceeded the national rate. Factors supporting consumption include employment growth and above average population growth. Consumption may also be boosted due to increased household wealth from house price increases. Part of this consumption growth is likely to be from reduced savings, consistent with the national experience. The outlook for household consumption is positive, consistent with the general improvement in economic conditions. This has been supported by low mortgage interest rates and, until recently, low fuel prices. Retail spending, which includes spending by visitors to the State, has been easing recently but has been strong in yearaverage terms, increasing by 2.7?per?cent in real terms in the past year, marginally below the national growth rate. Private InvestmentTasmanian business sentiment across metro and regional areas is consistently reported as being very high: according to the most recent Sensis Business Index, business confidence in Tasmania is currently the highest in the nation. This is consistent with the return to growth in business investment, particularly higher levels of investment in machinery and equipment in recent quarters. Large private sector projects planned or underway include major tourism accommodation developments, the Cattle Hill and Granville Harbour wind farms with an estimated combined cost of around $600?million and some major rebuilds of commercial properties in the Hobart and Launceston central business districts. With the pipeline of new major projects, business investment appears likely to remain robust over the forecast period. However, the timing of major investment projects can lead to volatility in business investment levels from quarter to quarter. According to the ABS, house price growth in Hobart is currently around the highest of Australia’s capital cities, increasing by around 12.5?per?cent over the past year. Rental demand is currently very strong, especially in the Greater Hobart area, reflected in low rental vacancy rates, increasing rental prices and high rental yields. The strength of Tasmania’s housing market, especially in the Greater Hobart area, has been reflected in forward indicators, including trends in residential building approvals and commencements, and residential building work yet to be done. These indicate that potentially quite robust growth in dwelling investment can be expected in the coming months. The most recent ABS estimate of the value of residential building work yet to be done, for example, is 30?per?cent higher than for one year earlier. Government ExpenditureGovernment expenditure includes the costs of providing goods and services by all levels of government (public consumption) and public capital expenditure. Overall, government expenditure has been increasing over recent years, including increased public investment in infrastructure. Current levels of public investment are high, most of which represents spending by the State Government and its government businesses. The 2018-19 Budget includes significantly increased funding for infrastructure projects across the State, including increased investment in affordable housing and health facilities, additional roads funding, the construction of new schools, the Cradle Mountain Experience and a new prison in the North of the State. The University of Tasmania has several major investment projects underway or planned. These include the continued work on The Hedberg in Hobart and the planned relocation and expansion of the Launceston facilities from the Newnham campus to Inveresk. TasWater also has a major capital investment program to upgrade its water and sewerage infrastructure, with its scheduled investment increasing from an estimated $134?million in 2017-18 to $181?million by 202021. These estimates do not include the accelerated investment program agreed by the Government and TasWater, which includes higher planned investment levels in the outyears. These trends all point to increased levels of public investment, and public spending more generally, over the forecast period. ExportsInternational exports of goods and services account for around 13.6?per?cent of the State’s economic activity. The real value of export sales, as estimated by the ABS, can be volatile from year to year: in 2015-16, for example, exports of goods and services were estimated to have increased by almost 19?per?cent. This can have a significant impact on the State’s overall economic performance. Export conditions for many Tasmanian businesses are currently extremely favourable. Many of Tasmania’s key exporters are benefitting from higher global prices. Zinc prices have been around 24?per?cent higher over the past year (in Australian dollar terms), and aluminium prices 17?per?cent higher, with tin prices also increasing. Of great advantage to these exporters is that exchange rates have not reflected the increase in commodity prices important to Tasmania. Strong demand from Asian markets has led to growth in seafood export volumes as Tasmanian exporters look to satisfy that demand with high quality seafood products. The agriculture industry has also experienced solid growth in export sales over the past year, especially meat, fish and fruit and vegetables. Forestry-related exports have also been increasing, including sales of whole logs. Data from the ABS, including monthly merchandise exports in nominal prices, point to an almost unprecedented growth in export sales in recent quarters. The nominal value of merchandise exports in the year to March?2018 is estimated to be around 36?per?cent above the level of the previous 12?months. In the case of non-ferrous metals, the estimated increase is around 59?per?cent or $570?million, which represents around 16?per?cent of the total value of merchandise exports in the year to March?2018.These high commodity price increases may not account for all, or even most, of the recent increased export sales. Part of the growth is likely to be due to greater output of goods in the year, reflecting increased economic activity. Export sales in 2015-16 were also affected by a small fall in production by some energyintensive businesses as a result of Basslink being out of service and the State facing an energy shortfall. For some export goods, part of the increase in export sales may also be due to changes in inventories and the timing of transactions. The outlook is very favourable for Tasmania’s export sector as a whole. Commentators generally expect exchange rates to remain supportive to exporters. Global economic prospects are improving and high quality, valueadded commodities produced in Tasmania are likely to benefit from demand from overseas markets, in particular from China. According to the Australian Treasury, the current high prices for many commodities important to Australia are not expected to be sustained. This is likely to include prices of some key Tasmanian commodities, though for some it would take very significant declines to result in margins falling to unacceptably low levels. It is too early to assess whether the Queensland fruit fly incursion in the State’s North will have any sustained impact on the State’s fruit and vegetable industry and its exports. A very substantial effort has been made over recent months to eradicate fruit fly. The community, industry, businesses, and local councils have cooperated and played a critical role in supporting the necessary eradication and control programs. Biosecurity Tasmania will continue relevant fruit fly response activities during winter, spring and summer as necessary in order to achieve re-instatement of Tasmania’s fruit fly free status as soon as possible with key trading partners, and thus maintain important export markets into the future.Tasmania’s international export sector is expected to contribute very significantly to the State’s economic growth in 201718. Export levels in 2018-19, including for interstate exports, are forecast to remain high but are not expected to make the same contribution to economic growth next year as in 2017-18. Monetary Conditions Market interest rates continue to be low, with the cash rate set by the Reserve Bank of Australia remaining at the historically very low target rate of 1.5?per?cent. Financial markets are expecting the cash rate to remain at the current rate for the remainder of 2018 and increase to 1.75?per?cent by mid-2019. The RBA is reporting some tightening in short-term money markets, resulting in small increases in funding costs for some financial institutions and businesses as a result of higher bank funding costs in the United States. To date, there are few signs that this has been reflected in mortgage rates. Inflation remains low in Tasmania, consistent with national experience where it is at the lower end of the target range set by the RBA. Some upward pressure on Hobart’s inflation is expected from increased rental accommodation prices as they are yet to be reflected in the CPI data. Producer price inflation has been increasing nationally, reflecting higher commodity prices, including fuel prices, and this may be reflected in retail prices in Tasmania. However, against this is the intense competitive pressure in the retail sector, which has constrained price increases for retail goods. Wages growth in Tasmania remains at around 2?per?cent, again reflecting national trends. The strengthening of the national labour market may put some upward pressure on national wages growth, but the national wage price index is showing a very modest increase in wages growth to date. This is attributed, in part, to increasing labour market participation, which has prevented the national labour market from tightening to the point where wage pressures can be expected to be significant. Labour market participation in Tasmania has also been increasing in response to improved employment opportunities. Hobart’s CPI is estimated to increase by around two?per?cent in 2017-18, rising marginally to 2??per?cent in 2018-19.Labour MarketThe Tasmanian labour market has strengthened over the past year with increased employment and more people in the labour force (a higher participation rate). The increased employment largely reflects a continuation of the trend of increased female employment. In recent months, the proportion of persons in full-time employment has been increasing. The combination of higher levels of employment and increased full-time employment generally indicates a strengthening labour market, and often an expanding construction industry. Employment was estimated to be 2?900?persons higher in April?2018 than one year earlier. At 246?200?persons, the April?2018 level has eased from the series peak achieved between December?2017 and February?2018 but remains very high by historical standards. Tasmania’s participation rate has continued to increase over the past year, in response to these improved conditions. Together with an increasing working age population, this has resulted in little change in the State’s unemployment rate at around six?per?cent. Employment growth of 2??per?cent is expected for 2017-18, significantly above the longterm trend of just under one?per?cent. The year-average unemployment rate is estimated to be six?per?cent for 2017-18, reflecting the high levels of labour market participation. Employment growth at the longterm trend rate is forecast through the year for 201819, consistent with the economic growth rate expected for that year. This is consistent with around 2?300 more persons employed in June 2019 than in June 2018. In year-average terms, however, the forecast employment growth for 2018-19 is around ??of?one?per?cent, due to the very high employment levels for several months in 2017-18 which has boosted the expected year-average result for that year. Treasury does not produce labour market forecasts over the forward estimates period; however, employment growth of 9?300 from July 2018 to June 2022 would be consistent with long-term trends in the outyears. The unemployment rate is also forecast to be 6 per cent in 2018-19 and is projected to remain at this rate in the outyears, based on employment growth at the longterm trend. Historically, Hobart and the South East region has tended to display more favourable labour market conditions due to a higher proportion of employees in service industries, including the public sector. In the other regions of the State, a higher proportion of workers are employed in nonservice industries, such as agriculture, mining and manufacturing, which are more exposed to competition from international, often lower cost, producers and movements in commodity prices and exchange rates. Unemployment rates in Tasmania’s regions have shown significant variance between regions and volatility in recent years (Chart 2.1). These rates have recently been converging, though labour market conditions remain quite different across the State. Chart 2.1:Tasmanian Unemployment Rates by RegionSource: Labour Force, Australia, Detailed, ABS Cat No 6291.0.55.001Employment growth has been strongest in Hobart and the South East over the past five years, increasing by around five per cent over the past 12 months. The experience in Launceston and the North East has been more mixed, but there has been a return to employment growth in the past year at close to the rate in the State’s South. In response, labour market participation has been increasing in these regions, constraining the decline in the unemployment rate. By contrast, the West and North West experienced increasing employment up to mid-2016, and rising labour market participation until late 2015, but these have since been easing. The participation rate in the West and North-West is now significantly below the rate in the other two regions. The varying economic conditions have also been reflected in population movements as explained in more detail below, with population growth highest in the State’s south and lowest in the West and North West, including several years of population decline. Much of the decline in the unemployment rate in the West and North West, therefore, has been due to a decline in the working age population and the participation rate. Population GrowthPopulation growth is currently at its highest level since late 2010, with Tasmania’s estimated population of 522?000?persons in the September?quarter?2017 estimated to be 0.72?per?cent above the level in the September?quarter?2016.Periods of high Tasmanian population growth are primarily driven by interstate and overseas migration flows. Net interstate migration has been positive since the March?quarter?2016 and net overseas migration has been positive since the September?quarter?2015, with both increasing over recent quarters. Tasmania’s natural population increase (births minus deaths) has been declining in recent years, reflecting Tasmania’s ageing population, and was negative in the September?quarter?2017, the first quarter when negative growth has been reported. Over the past five years, the Tasmanian population has grown by around 9?000?persons, though with widely divergent trends across Tasmania, including population declines in some areas. The general trend has been a contraction in population in the West and North West region, some mixed trends in the State’s North, with some areas of quite strong growth, including Latrobe, and much greater growth in the State’s South. The growth in population in the Greater Hobart area, particularly in Clarence and Kingborough, has been a contributing factor to the very buoyant housing market, including the market for rental accommodation. Tasmania’s Tourism Sector Tasmania is currently experiencing a tourism boom, which is delivering significant economic benefits across the State. The impacts can be seen through increased activity in retail trade, accommodation and transportation and recreation services, as well as increased levels of nonresidential construction, with several tourism accommodation projects underway across the State.The number of visitors to Tasmania has increased over the past few years, reaching 1.26?million in 2017, up almost 40?per?cent over the past five years. Total tourism expenditure has been growing at an even greater rate, estimated to have increased by almost 67?per?cent over the same five year period, to $2.33?billion in?2017. According to the estimates by Tourism Research Australia, tourism accounted for direct employment of around 19?000?persons in Tasmania (including part-time employment) in 2016-17. According to the TRA, tourism contributed more to Tasmania’s economy, at just over five?per?cent of the State’s total gross value added, than the tourism sector in any other state or territory. Chart 2.2:Visitors to Tasmania by Place of Origin, 2017Source: Tourism Tasmania data (12 months to December 2017)Visitors from interstate account for over 80?per?cent of all visitors to Tasmania. In 2017, there were more visitors from each of Victoria, New South Wales and Queensland than from any one international country. Interstate tourists account for a higher share of total tourism activity in Tasmania than for any mainland jurisdiction, according to the TRA. Of the international visitors, most are from Asia (Chart 2.2) and the largest increase over the past five years has been from China (including Hong Kong). There has also been strong growth from other Asian countries, including Singapore, Malaysia and India. The United States is also a very important market, with visitor numbers increasing significantly in recent years, supported by the devaluation of the Australian dollar against the US dollar. These estimates do not include visitors on cruise ships that dock in Tasmanian ports. There has been particularly strong growth in recent years, including an estimated 45?per?cent increase in 2016-17 in the number of days spent in Tasmania by ship visitors, to 237?000?visitor days. Affordability of Housing in Tasmania The strength of Tasmania’s housing market has led to concerns about housing affordability and the availability of rental accommodation, especially in the Greater Hobart area. A common measure of housing stress is when more than 30?per?cent of household income is required for mortgage or rental payments. According to the Real Estate Institute of Tasmania, the median house price in Tasmania in the March?quarter?2018 was $360?000, up 10.8?per?cent from the previous year, but still the lowest of all the states and territories. House prices are highest in Hobart, but they are around 40?per?cent below the median house price for all capital cities in Australia. Tasmania remains one of the more affordable jurisdictions in Australia to own a home. A Tasmanian household on the median income would need to allocate 25.7?per?cent of its income to service the average new mortgage, based on the minimum payments required, according to the REIT. While this share of income has increased over the past year, it is still below the housing stress level and below the share for households in New South Wales, Victoria, Queensland and South Australia and below the national average of 31.6?per?cent. Tasmania also has the highest proportion of households that own their house outright, and therefore do not have a mortgage on the house in which they reside.These estimates provide a guide to housing affordability for a household seeking to enter the housing market. They do not, however, apply to the stock of households that currently have mortgages, some of which would have been taken out decades ago. According to the ABS using its census data, almost 95?per?cent of Tasmanian households with mortgages in August?2016 paid less than 30?per?cent of their household income on mortgage repayments, up from 92.5 per?cent in August?2011. The equivalent national share in August?2016 was almost 93 per cent, indicating that a smaller share of Tasmanian households were under housing stress, using this measure, than nationally. Further house price growth since mid2016 is likely to have reduced the share of Tasmanian households paying less than 30?per?cent of their household income on mortgage repayments, though some households will have benefitted from higher household income due to additional employment opportunities. Some of these households would have been paying above the minimum repayment required by their lender, because a large proportion of Australian households are ahead on their mortgage repayments. According to the RBA, in 2017 Australian households held buffers, including balances in offset accounts and redraw facilities, equivalent to 2??years of scheduled repayments at current interest rates. Around a third of Tasmanian households live in rental properties, including public and community housing. These households tend to have lower incomes than owner-occupier households. Low income households, particularly in the Greater Hobart area, have been experiencing difficulty in securing affordable rental accommodation due to rental price increases and a shortage of supply. The rental market is also tightening in the other regions of the State. According to the ABS, around 90?per?cent of Tasmanian households who were renting in August?2016 paid less than 30?per?cent of their household income on rent, up slightly from 89.5?per?cent in August?2011. Again, in August 2016 the equivalent share nationally was lower than in Tasmania, at 88.5 per cent, indicating a greater share of households nationally were under stress according to this measure. However, since the 2016 Census, this share of all households for Tasmania is likely to have fallen due to the growth in rental prices.Factors that have contributed to the buoyant housing and rental market include above trend population growth in the South of the State, including increased international students, and employment growth that has boosted the purchasing power of some households. The growth in visitor numbers and the increased availability of short stay accommodation may have also affected the broader housing market, though there are insufficient data to confirm this at this stage.The market started to respond in early 2017 with large increases in dwelling approvals and residential construction commencements. In addition, the State Government is implementing a range of measures, including releasing selected parcels of Crown Land for residential development and providing property owners with incentives for renting to low income households. Pressure on housing may also ease through the measures adopted by the University of Tasmania, including the purchase of the Midcity Hotel and the further development of high density student accommodation.Risks to the OutlookThe outlook for Tasmania is more positive than in recent years. External economic conditions look to be favourable, with the global economy gaining momentum and demand from Asia remaining strong. The prospects for the Australian economy are also more positive and domestic demand within Tasmania is also buoyant. On the international front, there is uncertainty over China’s future growth prospects, with concerns over the stability of its financial system and particularly the rapidly growing levels of debt. As China is also Tasmania’s principal export market and an important source of tourism visitors and international students, any slowing down of the Chinese economy would have direct impacts on a range of businesses in Tasmania. There are also concerns over increased levels of protectionism and whether this will affect global trading flows, and therefore future global economic growth. Some industries important to Australia, and also Tasmania, could also be directly affected, including in the resources sector. Other geopolitical tensions, including on the Korean Peninsula and around the South China Sea Islands, also present a risk to the global outlook.Nationally, the combination of high levels of household debt and weak wages growth presents risks to household spending, especially if the fall in property prices extends beyond Sydney and households assess that they need to repair their balance sheet by increasing savings. Households may also consider that current consumption levels may not be prudent if future mortgage rates are expected to increase. This could result in reduced spending by mainland households on travel, including to Tasmania. Also, if this leads to slower national economic growth, it would likely impact on the State’s interstate exports, which are an important source of demand, and therefore economic activity. These risks also apply to Tasmanian households, though as average debt levels are significantly lower, the overall impact is likely to be less significant than in other states and territories. For Tasmania, high levels of private investment are needed for sustained economic growth. While the outlook for private investment is positive, investment levels can be volatile and can surprise on the upside or the downside due, in part, to the timing of major projects. This could result in business investment in Tasmania trending back downwards for a while. This would have a contractionary effect on economic growth and on the State’s labour market. On the upside, dwelling investment in Tasmania may increase by more than anticipated next year and beyond, in response to the very positive housing market conditions and provide further stimulus to the State’s construction industry. A buoyant housing market and increased housing supply can also trigger increased household spending in a range of areas, including the purchase of furnishing and other household equipment, including white goods.Tasmania’s international exports may also increase by more than expected in future years, building on the large increase expected for 2017-18. Exports of a range of agriculture-related goods and seafood, in particular, have been increasing strongly and if the trend is continued and new markets are developed, this would stimulate agriculture, fishing and food processing industries across the State. The State’s forestryrelated industries also have potential for further growth, in response to improved market conditions. With US interest rates set for further increases, this could lead to a further devaluation of the Australian dollar if this is not fully priced into exchange rates. This would provide increased opportunities for Tasmania’s exporters and also support the demand for international education and tourism in the State. ................
................
In order to avoid copyright disputes, this page is only a partial summary.
To fulfill the demand for quickly locating and searching documents.
It is intelligent file search solution for home and business.
Related download
Related searches
- tfm volume 1 part 2 chapter 4700
- fafsa application 2018 19 online applicati
- 2018 19 broward school calendar
- integrated 1 chapter 2 math
- 1 john chapter 2 explained
- 1 john chapter 2 study
- chapter 2 lesson 1 quiz
- section 1 chapter 2 science
- chemistry paper 1 2018 to 2020
- chapter 2 the living cell chapter preview 15 2 1
- chapter 1 section 2 basic economic concepts
- chapter 2 lesson 1 genetics