- Business Investment -

Several major projects are starting up especially in central Queensland which have the potential to compensate for downturn in housing. (Fraser A 'Go north for all the action', A, 7/6/02)

Queensland has a bright economic outlook because $30m worth of major projects are on the drawing boards (Owen R. ‘$30bn in projects on the horizon for Queensland’, Courier Mail, 22/4/02 (Comment: This illustrates yet again the need to consider whether projects contribute significantly to the economic welfare of the Queensland community simply because they are LARGE investments)

An increase in business investment (which has fallen for 3 years) is now expected (Davis M. 'Nurturing the economy',  Financial Review,  3/4/02)

Australia could experience an investment boom (according to an analyst) because (a) investment has been modest and it did not build up overcapacity as others did (b) low interest rates and low exchange rates will also help (Chong F. 'Growing hopes of a boom', Australian, 14/2/02) [CPDS Comment - if significant structural adjustment is needed because of the poor returns on Australia's traditional resource related investments, then weak investment in recent years may not lead to a boom - see Section 3 of Queensland's Challenge]

The PNG to Queensland gas project, that had seemed to be dead may finally get the go ahead - because of (a) collapse of the Timor Sea gas scheme (b) the legislated demand for gas in Queensland (c) demand from Sydney and (d) resolution of internal fragmentation (McCarthy J 'Pipe dreams', Courier Mail, 8/12/01)

However:

• see Sovereign Risk and the PNG Gas Pipeline
• the Timor Sea gas scheme seems still to be a viable option (Phacaes J. 'Darwin gas pipeline back on as East Timor backs off', Australian, 22-23/12/01)

Mining industry investment is at its highest level since September 1999 in key projects (eg Robe River iron ore; AMCs magnesium plant; Hail Creek Coking Plant). This is occurring at a time when commodity prices are down and there is no immediate sign of recovery. Simultaneously some commodity production is being cut out. Companies are setting high benchmark returns on investment (Hextall B and Oldfield S 'Mining investment soars, Financial Review, 29/11/01) [See also Resource and Industrial Investment]

"After 30 years of discussion and 10 years of detailed negotiations, mining giant Comalco (committed) to the construction of an alumina refinery in central Queensland. ... Taxpayers contributed heavily to the $2.7bn project - the Queensland Government delivering what it termed common user infrastructure worth $150m and the federal government $135m as an interest free repayable loan " (Fraser A. 'refinery given the green light', Weekend Australian, 27-28/10/01)

However:

• the main alternative location that had been considered had been Malaysia - which is apparently now experiencing difficulties gaining foreign investment because of concerns about possible Islamic extremism (see Islamic Extremism in SE Asia)
• Comalco stated that "The project would not have proceeded without the strong levels of government funding" (Fraser op cit)
• this project needs to be seen as a beginning in the evolution of the Queensland industrial sector. The project is not expected to be very profitable in its early stages and the benefits flowing from it alone will be much less than if it is used as a lever for other activities. Access to abundant very cheap power is a major factor in the location decision (McCarthy J. 'Decision could accelerate state development', Courier Mail, 27/10/01)
• such projects are energy intensive - and thus raise questions about Australia's ability to meet greenhouse gas emission reduction targets - if these are adopted (see also Climate change; and Greenhouse)

Queensland is likely to experience a large boost in investment in 2001-02 - due mainly to a 47% ($2.5bn) increase in expected mining industry investment (Owen R. 'State set to reap $2.5bn investments bonanza', Courier Mail, 7/9/01)

"Queensland, Australia's Smart State, is experiencing a golden era for business investment. ... Just ask some of the recent arrivals - Virgin Airlines, Qantas, IBM, Boeing, Hatch Engineering, GE Medical and the Kerry Group. In just the last four months Queensland has welcomed more new investment from Australian Magnesium Corporation, Macquarie Bank, Smiths Industries, Qantas 767 Maintenance, Arnott's, Suncorp Metway and the Hail Creek Mine" ('Queensland wins the world's largest magnesium metal plant', Queensland Government advertisement in Financial Review, 9-10/6/01)

However:

• Queensland's continued emphasis on an out-dated industrial-era economic tactic (ie attracting external investment in capital intensive production) was arguably the major reason for poor overall performance during the 1990s, and the social stresses which emerged in marginal regions (see Defects in Economic Tactics, Strategy and Outcomes);
• difficulties are apparent in relation to major resource and industrial investment and resulted in a perceived need for subsidies for AMC;
• not everyone is impressed by the Smart State Strategy (eg See academic's view and Recent Economic Strategies, being Section 2 of Queensland's Challenge]
• "The Beattie Government has been accused (by the Auditor General) of needlessly hiding details of its deal to woo Virgin airlines into Queensland and abusing use of 'commercial in confidence' provisions" (Greber J. 'Beattie hit over secret Virgin deal', Courier Mail, 18/5/01) [Comment: one observer, who might have had inside knowledge, suggested that the publicly speculated $10m cost was about 50% too low] [See also Buying Industry]

"For years now economists and politicians have rightly pointed out that Queensland is a farm and a quarry and needs to develop value-added industry. That's where AMC comes in. Light metals is a sunrise industry and there is a strong chance that the steady supply of lightweight and strong metals will create spin-off manufacturing industries" (Franklin M., "Losing track of the big picture', Courier Mail, 9/6/01)

However: "(the Premier) announced two new major mining industry projects .... (he) was understandably ecstatic ... Unfortunately though few shared Beattie's enthusiasm. The reason? They'd heard it all before ..." (op cit)

And: "Plans for a $1.7bn light metals industry in central Queensland collapsed last night when backers failed to raise enough equity to satisfy their bankers" (Franklin M and McCulloch J. 'Metal plant jobs sink', Courier Mail, 21/7/01)

But then: The Federal Government is considering $100m support as a deferred interest loan (Lewis S. 'Cabinet considers kick-start for $1.3bn project, Financial Review, 6/8/01) [More including CPDS Comments]

'Queensland may be nearing the end of its business investment slump just as the rest of Australia has entered a phase of negative growth, according to a state government economic review ... the rate of decline in business investment in Queensland has eased (in recent quarters)". (McCarthy J 'Business investment fall may be over in Queensland', Courier Mail, 25/5/01)