When the Global Financial Crisis (GFC) occurred in 2008, Australia remained relatively insulated in comparison to other first world countries, because we were riding on the back of a resources boom. More recently a drop in coal and iron ore prices and a falling Australian dollar have resulted in a downturn in the national economy. But fortunately for the Northern Territory, the Ichthys project was appearing on the horizon as mining was declining; this was the major factor causing investor confidence to remain high in the Top End.
The Ichthys project has had both positive and negative impacts on the NT economy:
- a shortage of suitable housing has created a demand that has resulted in extensive infill development and the release of much needed greenfield residential land;
- the property market has remained strong for investment, with higher than normal yield rates for investors;
- in contrast, property prices have remained relatively stable with much of the available rental property stock being fixed into longer term rental agreements with the larger corporates;
- construction of the INPEX workers camp has prevented property prices overheating; however, the use of a fly-in-fly-out (fifo) workforce has meant that a significant portion of these worker’s incomes has not been spent locally; and
- the cost of living in the Top End has escalated; this has been particularly evident in fuel and electricity costs, as well as in service industries with a high labour content, such as food and entertainment.
One of the key industries driving the Northern Territory economy has always been tourism, but it has been impacted upon by both external and internal influences. Until recently a high Australian dollar has meant that international tourists have tended to avoid Australia, whilst our domestic tourists have taken the opportunity to travel abroad.
In the Top End, the shortage of short-term accommodation and the volume of fifo workers have resulted in higher than normal travel and accommodation costs for tourists. The decreased volume of tourists has resulted in lean times for all tourism operators; even pubs and clubs have suffered with fifo workers less likely to socialise than those on holiday.
Obviously there will be an end to the construction phase of the Icthys project and while some analysts are concerned about the negative impact this will have on the Top End economy, others see this as an ideal opportunity to re-invest in industries such as tourism, that have been neglected.
The recently released Northern Territory budget appears to be addressing both short and long term challenges and opportunities for the NT. The budget channels a high level of spending into infrastructure - this timing will suit the construction industry, coming off the back of the Ichthys project.
The budget also includes spending that will directly benefit the tourism sector. A low Australian dollar combined with improved accommodation and travel services will make the Northern Territory a much more attractive tourism option.
Spending on sporting facilities and community services will hopefully help to encourage workers and active senior Territorians to remain in the Territory, which over the longer term can be expected to result in further strengthening of our economy.
On balance, the Urban Development Institute of Australia (Northern Territory) commends the NT Government on a budget that provides for long-term, sustainable growth.
The development and construction sector has also been pleased to see the strong NT Government focus on cutting red tape and eagerly awaits the outcomes of the current review. Many of the issues which have been identified can be quickly addressed and if this can be achieved it will result in immediate savings in housing costs.
The development industry has been busy over the past five years delivering much needed housing to the Top End. It is imperative that the supply of land for new housing and the redevelopment of infill sites continues and is able to meet ongoing demand. The Reserve Bank recently announced further interest rate cuts - there could not be a better time to invest in the Northern Territory.