Two-speed economy continues to plague Queensland businesses

Despite some promising signs of recovery, not all businesses are benefiting from the boom in the mining and resources sector, with a two-speed economy continuing to be ever present in Queensland.

Following the release of its latest business survey, Chamber of Commerce and Industry Queensland (CCIG) warned of a disparity across the State in terms of overall performance.

While some sectors are doing well – such as mining and manufacturing – others, such as retail, continue to struggle with challenging business conditions.

The CCIG Pulse Report for the December 2011 Quarter showed that the Queensland economy was heavily reliant on the resources sector which was driving a massive expansion in capital expenditure, growth in jobs and economic activity generally.

However, the growth of this industry was not counteracting any optimism in other industries that make up Queensland’s two speed economy, according to CCIQ President David Goodwin.

Mr Goodwin said the effect of the resources industry meant smaller SMEs were struggling to attract workers and remain viable.

“The Queensland Government must remember these other sectors when developing policy proposals and cannot continue considering businesses as a cash cow to fill their empty treasury vaults,” he added.

On a more optimistic note, the Pulse Report revealed that economic confidence in the Queensland state economy continued to improve over the December quarter – moving into positive territory for the first time since early 2010.

Queensland businesses were less confident in the Australian economy, with the Pulse index remaining below the 50 basis point mark, at 48.6, meaning more businesses expect the national economy to weaken over the coming twelve months, rather than remain the same or improve.

The Pulse survey also found that Queensland businesses enjoyed only modest turnarounds in business activity, with profitability remaining concerningly low for most sectors over the December period.

While businesses are seeing an increase in business activity, Mr Goodwin said the cost of running a business in Queensland was keeping profitability low.

“It’s no secret that business costs have risen significantly this year and Queensland is fast becoming one of the most expensive and highly regulated places to do business,” he said.

“While profitability remains low businesses will not be in a position to invest in businesses growth or to employ more people.

“If we want the Queensland economy to start moving forward, business costs in areas such as industrial relations, workplace health and safety and environmental regulation must be reduced,” said Mr Goodwin.

According to Mark Toon, Commonwealth Bank QLD General Manager of Corporate Financial Services, the strengthening picture in business optimism revealed how the state was now in a better position to focus on new business opportunities as flood recovery work drew closer to completion.

“With 2011 now behind them and a large part of major recovery work completed, Queensland businesses are increasingly better placed to capitalise on the next stage of economic growth, driven in particular by new projects in the mining industry,” Mr Toon said.

“Another positive sign is that sales and revenue forecasts are looking healthier and that is important, as the latest results here are in line with previously forecast expectations.

“Forecasts for the first quarter of 2012 are also for this to increase, however the challenge remains turning this into profitability. Whilst business profitability has improved from previous quarters, overall levels amongst Queensland companies remains relatively poor,” Mr Toon added.

More detailed information can be found in the full report, Pulse Report – December 2011.