QTPA Member Alert | TURF INDUSTRY ISSUES OF IMPORTANCE (16/7/2012)

TURF INDUSTRY ISSUES OF IMPORTANCE

Our involvement at the senior level of industry and state and federal government gives us access to information that will be of interest to the Queensland Turf Production Industry.  I have detailed those below for your information.

• CARBON PRICE PASS-THROUGHS: As regards to the wider impacts of ‘carbon pricing’ on indirectly affected businesses and households it will take time to become clearer.  So far impacts in the areas of closest focus such as electricity and gas prices, have been very much as expected; an increase in electricity prices of around 2.1 to 2.3 cents per kilowatt hour; and an increase in natural gas prices of around $1.20 per gigajoule.  For light energy users these absolute impacts represents an increase of around 10%; for heavier users, who pay lower prices to start with, the increase is up to 20% or more.

From example of more than 600 businesses who were asked whether they intended to raise the prices for any of their products or services from July 2012 as a result of the introduction of carbon pricing, the following indicates their response:

• Manufacturers: 51% plan to raise prices on all of their selling items, over a quarter 27% will raise prices on less than half of their items.
• Services: advised that there was 40% that intended to increase the price of some or all of their items, with 46% planning to raise prices on less than half of their items.
• Construction sector: 44% of construction businesses intended to increase their prices, 40% plan to raise prices on all of their selling items.

• ANNUAL WAGE REVIEW: on the first of June 2012 the Minimum Wage Panel of Fair Work Australia (FWA) handed down its decision in the Annual Wage Review 2011-12. The modern award minimum wage was increased by 2.9% from the first full pay period on or after the first of July 2012.  The national minimum wage was increased to $606 40 per week for $15 96 per hour.

• INFRASTRUCTURE QUEENSLAND: In late June the Queensland government announced the establishment of infrastructure Queensland.  It will be chaired by the Deputy Premier Jeff Seeney MP.  The group will provide advice to the State government on long-term planning and priorities for infrastructure.

• AUSTRALIAN ECONOMY UPDATE: the Australian economy expanded faster than expected in Qtr. 1, 2012 and the unemployment rate has been stable at around 5% for almost a year.  Mining investment is dominating expenditure in activity nationally, but household consumption is also continuing to grow strongly.  Weakness is highly evident however in the non-mining sectors and especially in the residential construction cycle.  Together with the ongoing global risks, the local weakness persuaded the RBA to cut the cash rate by 50 basis points in May and another 25 points in June to 3.50%. The RBA is now widely expected to keep the cash rate on hold until later this year as it gauges the effects of the latest round of cuts, which typically takes three to six months to kick in.

Major mining companies in Australia are now publicly expressing concerns about the impact of the slowing global economy on the outlook for commodity prices, highlighting that if commodity prices were to decline much further, then some mining projects may be postponed or cancelled.  Concerns about rising construction costs and wages pressures are also raising the risk of delaying or cancelling investment projects mining pipe line.

Elsewhere in the economy, low confidence, ongoing economic and political uncertainty, the strong Australian dollar and high wage growth in specialist labour is inhibiting activity in manufacturing, retail related services and residential and commercial construction sectors.

NB: Importantly there is a growing feeling in some states that the long awaited household and business spending upturn, especially in the housing cycle and some mining related investments, will boost growth in 2013-14.

Jim Vaughan

Chief Executive Officer