Matthew Sainsbury reviews the opportunities for Australian directors and their companies that arise from a shift in Queensland’s economy. 

    Queensland may not have the same reputation as Western Australia when   it comes to mining, but the resources sector is every bit as important for the state’s economy. For some years now, the most successful businesses in Queensland have been related to resources in some fashion.

    Take Gladstone, for instance; located relatively close to Brisbane. It has been a much in demand natural resources hub and it is very much the epitome of the traditional Queensland economy. It has a population of around 30,000, but is the fifth largest multi-commodity port in Australia and the world’s fourth largest exporting terminal.

    Gladstone also has three major liquefied natural gas mining projects in the pipeline and there are several mines already operating in the region. But these resource projects are quickly coming to completion and so Gladstone also represents the challenge facing Queensland in the future; it needs to transition away from a reliance on natural resources, to other economic opportunities. This is where it becomes exciting for company directors: from government to economists, Queenslanders understand that the state needs to broaden its economic horizons and this means there are opportunities across a host of different verticals.

    “Queensland will have the benefit of the export phase of the mining boom, but that on its own won’t be enough to offset the loss of capital expenditure by the mining sector,” warns Matthew Peter, chief economist at QIC, an investment company created by the Queensland government in 1991. “We really need the non-mining sectors to contribute.”

    According to Peter, there are two requirements for the Queensland economy to make the transition from the investment phase of the mining boom: one, the competitiveness in the local economy needs to improve and two, the state’s population growth needs to sustain its recovery from the global financial crisis (GFC)
    and floods.

    Peter believes the state has progressed well in meeting these challenges and the progress is having a positive flow-on effect to other sectors.  “Consumer spending is picking up,” Peter says. “Retail trade grew quite sharply in the first quarter and has averaged 2.5 per cent growth on an annual basis, which is reasonably robust compared to where it has been. That said, it’s a long way from its historical trend of six per cent growth prior to the GFC. Consumer spending
    will sustain growth of around three per cent
    going forward.”

    Queensland is also enjoying a strong property market, especially for medium to high density apartments. And, according to Peter, it is becoming an increasingly attractive economy for business as well.

    “In the GFC, we had the run up in the value of the Australian dollar which hurt international competitiveness. We also had strong demand for labour from the mining sector, which led to an increase in wages across the state, which further reduced the competitiveness of non-mining related sectors such as tourism.

    “What we’re seeing here now is improving cost conditions as the release of workers by the mining sector takes the pressure off wage growth and as the exchange rate falls from its mining-boom peaks. We’re also seeing a pickup in productivity.”

    According to the Queensland government website, economic growth in Queensland is forecast to be 3 per cent in 2014-15, before increasing to 6 per cent in 2015-16. Further, the economy recorded the second highest average annual growth rate of any Australian state or territory over the last 20 years. In 2012-13, Queensland overall business investment grew 9.8 per cent.

    The Queensland government, having identified four industry “pillars” to focus on, (tourism, agriculture, construction and resources) has zeroed in on creating an environment that encourages investment and supports company directors in their work.

    Organisations that are involved, or tangentially involved, in these markets will find themselves with plenty of government-incentivised assistance.

    Further, the state has some major events on the horizon, including the Commonwealth Games in 2018, and this will spur a general spike in investment and interest in the state.

    Significantly, major headway has been made in reforming the regulatory landscape for directors in Queensland regarding personal liability laws.

    According to the latest Australian Institute of Company Director’s Director Sentiment Index, more than 40 per cent of directors continue to believe that legislation on director liability has a negative impact on their willingness to continue on a board, and more than half believe it has a negative impact on their willingness to accept new board appointments.

    “We now have the best position for directors in terms of personal liability, thanks to the Queensland government’s reform of personal liability for directors and officers last year,” says David Grace OAM FAICD, partner at law firm Cooper Grace Ward (Twitter @CGWLaw).

    These reforms mean that the number of offences where directors could have been held personally liable has been reduced — from around 2,500 down to a position where a director, who is a person with executive control, may only be liable in about 250 cases.

    “The risk environment for a director, as long as he or she is following their obligations under the Corporations Act 2001 in terms of being exposed to a whole raft of Queensland legislation is significantly reduced,” says Grace.

    The government has also taken steps to ease pressures on organisations around occupational health and safety (OHS). These changes have worked to reduce the powers of unions. Now, unions in Queensland need to give 24 hours before entering a site for OHS purposes.

    Furthermore, the laws limit the ability for OHS workers to direct a work group to cease work for OHS reasons. In other words, the state government has taken steps to give the enforcement of OHS to the company and reduce the power of the unions. This, according to Grace, is good news for any company director looking to operate in Queensland.

    In addition to the commercial opportunities, organisations that count government contracts as a core business opportunity need to be aware that the Queensland government has changed the way it looks to work with private enterprise.

    “The Newman government has been a catalyst for a jump in government maturity in two ways,” says Gerard O’Hara MAICD, managing director of management consultancy 451 Consulting. “First, by challenging what services it should provide to the market and, second, by rethinking how to use the private sector more efficiently in delivering products and services.”

    This spells opportunity for the private sector. The government is reviewing a wide range of services under the contestability framework, as a core government policy now directs that it should not provide services that can be better delivered by the private sector.

    As a consequence, public-private partnerships are also expected to be a big opportunity into the future, says O’Hara.

    “We are also seeing a strong focus by the Queensland government on streamlining procurement processes. This is also good news for businesses which wish to partner with government as there is a move towards strategic procurement, acknowledging the need for true partnerships with the private sector,” O’Hara adds. “The government really wants to work with organisations which are confident about what they can provide and are willing to deliver specific outcomes for a fixed price. So directors need to be keenly aware of their internal products and services and the cost of delivering those to government. They will need to have a quality management system and very good risk management in order to consistently deliver to the government’s expectations. In this new environment, if you do not meet the service standards, the onus will be entirely on you to rectify it at your own expense. This plays to the strength of more mature professional services organisations that can deliver fixed price services and solutions that offer strong value for money.”

    When a government is making significant changes to the way it operates and significant ideological shifts in the process, there is the political risk with the potential of a change in government.

    While it is generally expected that the Liberal National Party (LNP) will win the next state election, the large margin that the party enjoys could be reduced significantly, with a recent poll putting the party ahead by just four points on a two-party preferred basis.

    However, it is expected that even with a change in government, some of the developments for business in Queensland that have already been implemented are likely to be continued.

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