Rate in April 2017The latest monthly labour force release by the ABS outlines there were marginal improvements in Australia’s seasonally adjusted employment and unemployment rates, whilst the participation rate remained steady. The number of employed persons increased by approximately 37,400 in the past month to reach 12.1 million in April 2017, with a decrease of 11,600 in full-time employment offset by an increase of 49,000 in part-time employment. Between April 2016 and April 2017, the number of employed persons increased by 1.3%. The unemployment rate decreased by 0.2 percentage points over last month to reach 5.7%, to be in line with the unemployment rate in April last year. The participation rate remained steady at 64.8%, the same as last month and April last year. Additional details regarding the latest ABS labour force data statistics are available from: http://www.abs.gov.au/ausstats/abs%40.nsf/mediareleasesbyCatalogue/46DFE12FCDB783D9CA256B740082AA6C?OpenDocument

In recent times, various Commonwealth and State funding programs (for example National Stronger Regions Fund, Building Better Regions Fund, Restart NSW, Royalties for Regions) have provided capital injections for infrastructure in regional areas. Whilst these funds ensure marginal projects get over the line the economic and social benefits are felt much more widely. Not only is there a short-term stimulus from the construction phase, there are considerable longer term and sustainable benefits from the operating outcomes of the project and the flow-on effects from it, especially from those that require new workers to relocate to the region. For example, a recent capital project in regional Australia analysed by AEC involved a $200 million capital cost over two years that generated 128 full time jobs but which also provided 154 ongoing full time jobs to the region. When accounting for families these 154 jobs will result in 400 new people to town, or a population increase for this region of 1%. Other than the project’s supply chain what are the other real economic and social opportunities that can be delivered from such a stimulus? Let’s have a look at some of these opportunities and how local government or economic developers can take advantage of them. Residential Property New people to town need housing. Depending on where the new people are coming from they are likely to be looking for a reasonable standard of housing. In advance of the project the future demand is likely to stimulate the local residential construction sector. Assuming a supply of suitably zoned land, there will be a lift in residential lot production and the marketing of house and land packages. These will be taken up by investors but in addition, others may seek to make their properties more attractive for either sale or rental and embark on alterations and additions. Its relatively easy therefore to see how the local residential construction sector might benefit. However, to be of maximum benefit the following factors should be in place: There is sufficiently zoned residential land. Subdivision and building approvals processes are well understood and encouraged. Investors have a positive short and long term view. Local government has a direct role to play in all three of these factors. Retail Goods & Services A larger population means more retail expenditure. The new potentially higher paying jobs may lift the average per person retail expenditure. This provides an opportunity for existing retailers to improve turnover but also for any vacant retail space to become more attractive as retailers and potential retailers see opportunity. This is also a time for local governments to re-examine the region’s retail offer and leakage (retail expenditure spent outside the area) and attract and encourage retailers to fill retail gaps. Tourism & Hospitality A larger resident population means more visitors, specifically those visiting friends and relatives. The visitor journey and stay needs to be a fulfilling one to encourage re-visitation and positive word of mouth promotion. This is a good time for local governments to consider their visitor offer and visitor markets and identify product gaps or better ways to supply visitors with information. Thinking about a region as a destination in terms of access, accommodation, attractions, activities, amenities and awareness is one way to identify investment opportunities for the future. Education and Training In our example, not only will there be an injection of school aged children there are also likely to be demand for post school or adult education. Whilst the numbers involved are not highly stimulatory they could just be sufficient for a government school to attract that additional funding or teaching resource. Sporting Clubs & Facilities Most communities have a plethora of sporting clubs and facilities. It is often up to the local government to supply and maintain sports grounds and other facilities. Again, the new people to town are a source of new talent and a resource that can improve the levels of activity in communities or demands on facilities and may prompt a rethink on service delivery. Community Facilities Local governments are generally responsible for supplying and maintaining community facilities such as performing arts centres, museums, community halls, swimming pools, showgrounds, etc. A population increase may provide that additional boost to lift the supply requirement to the next benchmark and thereby provide a stimulus to redevelop the art gallery or attract a better standard of performance. Industrial Land Development Similar to residential land, a region needs a good supply of industrial zoned land. As manufacturing, transport, logistics and warehousing evolve new facilities are required to enable businesses to compete effectively and efficiently. Local government’s role in industrial land development is similar to that mentioned for residential above. Transport Finally, transport encompassing road, rail and air will be impacted. More people means more cars and trucks on the road, not just local trips but also long distance. Perhaps the additional volume of traffic is sufficient to significantly upgrade roads or consider the bypass again. Perhaps there is a need to look at public transport – both locally and longer distance. Is there now sufficient demand to campaign for an improved rail service? Or maybe a case can be made for increased regular air passenger transport and an upgrade to the airport terminal. The above are just a few thought provokers about how an infrastructure stimulus and accompanying population increase can be thought of in terms of the economic and social opportunities that could be pursued by local government. AEC has many years’ experience in identifying and quantifying the economic and social impacts of infrastructure projects and in economic development strategies. For more information please contact Ashley Page at ashley.page@aecgroupltd.com.

AEC’s Visual Communication team are excited to announce that the Townsville City Council Annual report has once again been awarded Gold at the Australasian Reporting Awards (ARA). The Australasian Reporting Awards exists to improve continually the standards of reporting. The annual report especially, is an essential mechanism of accountability, a vital element in the governance process. The challenge for the person preparing the report is to interpret that information for their own organisation’s peculiarities and communicate it in a way that is effective for their stakeholders. AEC’s Visual Communication team have designed the report for several years and have picked up several Bronze Medals, a Silver and now two Gold Medals. This being a very significant achievement as in the 66 years of these ARA Awards, Townsville City Council is only one of a small number of local governments in Queensland ever to win a Gold Award. This years Annual Report was designed by AEC Designer Kirubesh Ganeshan. “Creative Director Lyndon Berresford said. “It’s great to work on these projects and not only us get the recognition but our clients hard work is recognised to. These awards also showcase the diversity of our creative projects. AEC’s philosophy has always been ‘to be regonised through the success of our clients’. That means that an award for our clients means a win for us”. For Further information contact: Lyndon Berresford, AEC Creative Director lyndon.berresford@aecgroupltd.com

It is with great sadness that we farewell Dr Peter Crossman. Peter had a significant influence on the founding directors of AEC. He was honours supervisor to Carey and employed both Carey and then Simon on the Queensland State Modelling (QSM) Project at the Centre for Applied Economics and Research (CAERA) at James Cook University. Simon then relocated with Peter to Queensland Treasury in Brisbane in 1991 before starting the Brisbane office of Australian Economic Consultants (AEC) in 1995. In more recent years Peter worked with AEC on various model development and client projects that required innovative yet intellectually grounded solutions. Carey said, ”I was privileged with the time and patience Peter invested into me and was fortunate to learn from the best and Peter was without doubt one of the best economists I have ever met. I am sure Peter will be up there with a coffee in one hand and a red marker in the other solving problems and making statistics perform magic.” Simon kept in regular touch with Peter after leaving Treasury visiting the Crossman family on several of their overseas excursions at Cambridge University, UK and in Abu Dhabi. After Peter semi-retired Simon invited him to assist AEC on many challenging product development projects and tricky client problems. Simon commented “Aside from being a great economist, Peter was a damn fine fellow. Aside from economics, our discussions would vary widely including diverse topics such as WWI, technology, cricket and rugby. I also always came away with an economics angle to think about.”

Drone technology and its use is one of the fastest growing sectors in the global economy. Sales of recreational and commercial drones are expected to grow from a base of $8.5 billion in 2016 to $12 billion by 2021 (41%). Drone-related industries are also expected to grow at similar rates. AEC, and our project partner Aviation Projects, recently worked with a Queensland local government client that sees the development of a Drones Strategy as a key economic driver for its region. The aim is to be at the forefront of developing a vision and objectives to maximise economic and social benefits. When considering your own situation and whether you can build a case to attract investment related to the drone industry there are lots of issues that need consideration. For example: Does your region offer any competitive advantages to attract drone-related business including political and organisational commitment? Is your location and terrain suitable, offering differing natural environments and urban areas? Drones and airports are not compatible so need to be effectively separated, so is there greenfield/ brownfield space available for drone-related uses? Is there an available, trained and motivated workforce with supporting services to accommodate expansion and growth in drone-related activity? A detailed and pragmatic investment attraction and sector development program will deliver real and tangible outcomes for the local area. Key focus areas to consider include: Having consistent and constructive policies supporting recreational and commercial drone operations. Increasing community awareness about the benefits and use of drones including regulations and privacy rules. Having the infrastructure needed to drive and support industry growth. Having appropriate incentivisation, grants and promotion programs in place. Making sure there is an effective collaboration and advocacy strategy in place to garner broader support.

The Townsville Hospital and Health Service (THHS) provides a crucial role in delivery of public health services to the North Queensland community, operating 18 hospitals and community health campuses as well as two residential aged care facilities servicing an area of around 148,000 square kilometres with a resident community of over 230,000 people. THHS also attracts patients from a broader catchment extending from Mackay in the south to the Torres Strait Islands in the north, and west to the Northern Territory border. The socio-economic significance of THHS to the region extends well beyond the health care services they provide. THHS is one of North Queensland’s largest employers, directly providing jobs for around 6,250 staff, and provides a significant contribution to the North Queensland economy. AEC examined the important economic contribution of THHS to the North Queensland economy through operational activities of THHS and the expenditure of patients and visiting friends/ family attracted to the region for health services, as well as construction works undertaken to maintain a high standard of patient care. The results of this assessment are being used by THHS to grow awareness of the important direct role and broader socio-economic contribution THHS provides to the North Queensland economy. If you have any queries related to this study or require evidence-based research to demonstrate the socio-economic contribution of your business or industry, please contact Ashley Page ashley.page@aecgroupltd.com .

One of the key challenges of regional communities is the attraction and retention of population. Whilst our main cities continue to grow and increasingly groan under the weight of both domestic and international migration, regional and remote Australian townships are often faced with very low or negative population growth that impacts upon the ability for these communities to prosper, which, in turn can magnify the population leakage to larger centres. The Federal Government, as part of its upcoming Population Policy is set to unveil plans to introduce mandatory settlement for some new skilled migrants into regional areas for periods of up to five years – albeit part of an effort to ease the burden of population pressure on Sydney and Melbourne, with the benefit of producing a direct skilled worker injection for regional communities. Whether seeking to attract, encourage or in this case legislate population increases into regional Australia or simply trying to retain existing population, the core challenge remains the same – people (generally) are attracted to larger centres because of what they offer – amenity and opportunity. The factors that encourage residents to remain in regional communities are broadly the same, whether they be long term residents or recently arrived migrants – employment, access to appropriate health and education facilities, infrastructure and support services and an adequate level of retail and leisure opportunities. In other words, a good level of liveability. The catch – in many/most cases the level of amenity and supporting infrastructure available to a community is directly determined by their size, which in turn determines the level of upper level government funding. AEC Group work with regional communities across Australia to assist in developing applied programs that address how to keep people living and prospering in our regional townships. We believe the key outcome to be targeted from regional development initiatives is the creation of new investment opportunities and jobs. AEC are able to provide support and Strategy Development across: Economic & Tourism Development Investment Attraction Advocacy Planning International Relations Workforce Development In addition to strategy development, assistance is also available to provide research and analysis that supports funding applications that can assist in delivering outcomes for communities by way of upgrading infrastructure, supporting community development and providing sporting and leisure facilities. For any regional development enquires, please contact the AEC team.

AEC Group Director was invited to speak at the 8th China International Nutraceutical and Functional Food Summit 2018 held in Beijing China in December. Carey presented on the growth of the supplement sector in China and the distribution channels and marketing tools available for brands on how to enter the market. If you are interested in a copy of the presentation contact AEC.

Townsville was hit by the worst flooding event in the city’s history, the one in five-hundred year event inundated thousands of homes and businesses with the impact extended across Northern and North West Queensland. More than a year’s worth of rainfall in a few days caused the Ross River Dam levels to a peak at 250%, leading to an emergency automated opening of the spillway gates and the worst of the flooding impacts. Although the long-term economic toll will never be fully known, there are fears that Townsville’s recent economic improvement may be severely set back with a 1 to 2 year clean up and recovery period projected. The city has already endured a severe economic downturn in recent years, following the closure of the Yabulu Nickel Refinery in early 2016, with the loss of 800 direct jobs. The city has endured significant social impacts associated with the downturn, including financial and family stress, increased property crime rates and a general strain on people’s mental health. Only in recent months has Townsville’s unemployment rate and broader economy begun to show signs of recovery, on the back of significant infrastructure projects including the $250 million North Queensland Stadium, $225 million Haughton Pipeline duplication (somewhat ironically established to secure Townsville long term water supply), and recent private sector investments such as the $300 million Sun Metals Zinc refinery expansion. The human cost of the flooding has been extensive, with more than 3,000 homes damaged[1], thousands of people displaced, many businesses lost, and over 20,000 homes left for significant periods without power. The loss of housing stock has seen a major tightening in the previously soft property market, with an acute shortage of rental properties currently being experienced across the city. Three deaths have occurred during the flooding and post due to melioidosis arising from soil-based bacteria. However, the resilience of the Townsville community should not be underestimated, with numerous examples of mateship and heroism throughout and post the event, with the rescue and recovery efforts of Townsville’s emergency services and particularly our armed forces a source of immense pride for Australia’s largest garrison city. It is known from previous disaster recovery efforts across Australia and internationally that tragic circumstances such as experienced in Townsville can become significant drivers of economic activity. There has been a complete change in Townsville’s economic positioning, with a surge in demand for trade labour, including plumbers, builders, carpenters, painters and plasterers, electricians, and even mechanics with many vehicles damaged and destroyed. Townsville’s building industry has gone from multi-year lows in activity to fully booked for at least the next 6-12 months. Hotels and restaurants are now full due to the influx of southern trade labour, and retail businesses which have been able to reopen are very busy with residents seeking to repair, rebuild and restock. To help understand the scale of reconstruction efforts, AEC has applied Input-Output (IO) modelling to estimate the direct and flow on effects felt throughout the Townsville region. The Insurance Council of Australia’s (ICA) currently estimates the insurance claims at $606 million, with 90% of claims residential and 10% commercial. These impacts were modelled through AEC’s IO model as follows: 50% of insurance costs ($303 million) represents residential building construction (for repair and rebuilding of homes). 30% of costs ($182 million) represents retail trade (for replacement of damaged household and business items etc.). 10% of costs ($61 million) represents non-residential building construction (for replacement and repairs of commercial premises etc.). 5% of costs ($30 million) represents construction services (for associated trade services and minor earthworks/landscaping etc.). 5% of costs ($30 million) represents professional, scientific and technical services (for design works, legal works and associated services). Only the construction activity expected to be undertaken within Townsville has been included in the assessment, and for the purposes of modelling, 70% local content has been assumed[2]. Based on these modelling assumptions, recovery efforts are estimated to generate the following economic impacts within the Townsville economy (in total during the recovery period): $1.0 billion in output (including $424 million in direct output). $450 million contribution to Gross Regional Product (including $146 million directly). $271 million generated in wages (including $116 million in direct incomes). 3,535 FTE jobs (1,548 direct FTE jobs). Table: 1. Insurance Reconstruction Economic Impact Estimates (Townsville Local Government Area) It is clear that reconstruction efforts will provide a large one-off economic stimulus to the Townsville economy. However, the longer-term impacts are more challenging to quantify. Many businesses have expressed difficulties in realising their insurance claims due to a lack of flood cover, fine print definitions of storm vs. floodwater and some policies limiting business flood cover to 20% or insured amounts[1]. Even where insurance claims are obtained, years of weak economic conditions and declining home values mean many businesses and families will have to make tough decisions about whether to stay and rebuild/reopen or to relocate elsewhere. Ongoing implications for insurance availability and costs will be another key factor in Townsville’s recovery. Many inundated areas were identified as being outside of 1 in 100 year flood zones in the city’s flood mapping, and many landholders now face at least a temporary drop in property values and a potential further rise in insurance premiums. The challenge for Townsville will be to ensure the broader economic momentum is maintained throughout the recovery efforts, with key industries such as tourism at risk of a drop in demand due to the perceived risks of travelling to the city during the rebuild. Maintaining momentum regarding the city’s large economic development opportunities will also be critical to underpin confidence and ensure that families stay in the region and businesses reopen. Current opportunities include a renewal of minerals processing and manufacturing (the potential reopening of the Yabulu Nickel Refinery, a proposed new adjacent nickel-cobalt refinery proposed by ASX listed Pure Minerals, a $2 billion lithium-ion battery plant proposed to be located at Woodstock), and the controversial Adani Carmichael coal mine for which Townsville is the regional headquarters and a key proposed centre for Fly In/Fly Out (FIFO) labour. It is also hoped that the current State Government’s review into the disaster will identify ways to better protect the community in any future events and that reconstruction efforts will not only rebuild but work to improve the city as it recovers. Matthew Kelly has been an Economist with the AEC Group based in Townsville since 2011 and has led AEC’s Townsville office since 2014. [1] Smee, B (2019). We're not insured': Townsville Flood Leaves Policyholders Stranded. Available from: https://www.theguardian.com/australia-news/2019/feb/14/were-not-insured-townsville-flood-leaves-policyholders-stranded. [2] It has also been assumed that construction companies and sub-contractors working that will work on site but are sourced from outside the catchment will contribute approximately one quarter (25%) of the level of Type I (production induced) and 5% of Type II (consumption induced) flow-on activity within the economy that a locally sourced company does. This reflects that construction companies working on site but sourced from outside the catchment region will contribute to local supply chains in terms of sourcing some goods and services they require locally. [3] Raggat, T. (2019). Townsville Business Shocked to find 20% Limit to Flood Cover. Available from: https://www.townsvillebulletin.com.au/business/townsville-business-shocked-to-find-20-limit-to-flood-cover/news-story/b767fcfdc1b56a0fc941173f3608b127.

Is Paid Market Research Really Worth It? Can’t we rely on information from 5 years ago? Can’t we use the anecdotal evidence? Aren’t there secondary sources of information available? Which research methodology will provide the best information? These are the questions often asked by many clients. Clearly paid market research is imperative in some situations; if it were not, it would not exist and thrive as a business around the world. Following is a perfect example of why market research as well as the research methodology selected are critical to making commercially sound business decisions. AEC recently conducted quantitative online survey supported by qualitative focus group sessions for one of our clients. We gathered as much data as possible through existing information. The anecdotal evidence provided suggested customers were motivated by value and variety – no surprises there! Most of us are value driven – the bigger, the better, the cheaper. We formed some hypotheses based on the evidence gathered and tested these hypotheses via an online quantitative survey and qualitative focus group sessions to dive deeper and explore the multiple layers of consumer behaviour. However, as the customers began to discuss their motivations, perceptions, needs, and desires during the focus group sessions, it quickly became evident that the tangible and economic benefits of the product were only the ‘icing on the cake’ whilst the real pillars of customer motivation, satisfaction and loyalty were tied to the emotional benefits. What our client was offering was more than just the tangibles of great value, product or variety, they were offering emotional connection, bonding, self-identity and were serving a purpose in life. Our key recommendations based on strategic insights centred around communicating the emotional benefits supported by the tangible and economic benefits of the product. Without this research, the client may have developed strategies and marketing initiatives targeting customers’ needs of the tangibles and missing the core driver – the emotional benefits. It is equally important to highlight value of correct market research methodology. Is this case, the quantitative online survey (as a standalone method) may not have captured the key driving factor behind customer motivations, satisfaction and loyalty. In order to make informed decisions about the majority of your business operations or strategy, take the time and make the investment required to validate the evidence, the ideas and information with your current and prospective customer base – understand what your customers want today and know where they are heading in the future. Have up-to-date evidence-based information about your evolving customer base and their habits so you have your finger on the pulse today and are ahead of the game for tomorrow.

The Australasia cruise tourism sector continues to grow and as cruise ships get larger so does the demand for dedicated port infrastructure for handling them increase. The largest cruise ship currently operating in Australia and New Zealand is Royal Caribbean’s Ovation of the Seas. At 348m in length and carrying 4,900 passengers and 1,500 crew, Ovation presents a berthing and logistical challenge for many ports. Indeed, New Zealand’s marque port Auckland can not berth Ovation at its cruise ship terminal on Queens Wharf right in the city centre. The current solution is for Ovation to hold position using dynamic positioning in Auckland’s Harbour whilst passengers are tendered ashore using the ship’s lifeboats. This approach, which can only be permitted in winds of less than 25kts, takes up to three hours for passengers to disembark and thereby vastly reduces the time passengers spend ashore and therefore the potential economic impact. Whilst the Port of Auckland has a long-term plan to extend Captain Cook Wharf (currently a car unloading facility) to become a new cruise terminal this planning is ten to fifteen years into the future. In the interim, it has been proposed to install two mooring dolphins at the end of Queens Wharf along with strengthening the mooring bollards to enable cruise ships the size of Ovation to berth. Berthing of such a ship will increase its economic impact by 6-7 times and also permit turnarounds. Without such infrastructure future visits by ships, the size of Ovation is put at risk as well as the likelihood that these ships will continue on a New Zealand itinerary visiting 5-6 more regional New Zealand ports. The resource consent application (development application) to construct the dolphins has been the subject of much opposition by elements of the Auckland Economy. A resource consent approval process presided over by three independent commissioners has been established to decide if the development should go ahead. A decision on the outcome of the resource consent application is due in March/April. AEC has been working with the Australian cruise industry for almost 15 years and this experience led us to be appointed by the Cruise Lines International Association (CLIA) to prepare and present independent expert economic evidence in support of the resource application. This process required an assessment of the economic case that accompanied the resource consent application, of the Auckland Council’s response to the resource consent application, of the submissions for and against the application and other expert economic peer assessments and opinion. No less than five economists have been involved in this exercise. AEC was invited to present our economic evidence at the commissioner’s hearings in Auckland. It's been a huge process and even if the commission recommends approval it may be subject to legal challenge. In the meantime, cruise itinerary planners continue to monitor the situation and make future port visitation decisions with this uncertainty in mind.

Do you know which trends (positive and negative) will have the greatest impact on your council’s community over the next 12 months, and more importantly how will council and community respond to these trends? As a leadership team, you will be thinking about your next areas of greatest vulnerability. Whether council has plans to address these vulnerabilities? What other information you will need to know to develop plans to respond and who else needs to be involved? Being as prepared as possible and thinking about some innovative ways to do this will ensure your organisation can respond as efficiently and effectively as it can. The key emerging trends in achieving this success can include: Leadership development for elected officials and staff. Strengthening community networks so your council has high-trust relationships with organisations outside the bureaucracy. Being a place for all people by making connections with diverse members of the community and inviting them to participate in council services and initiatives. Creating innovation teams across departments to break down silos and use interdisciplinary groups to address some of your biggest challenges. Broadening the definition of Sustainability by going beyond traditional environmental components to include economic and social justice factors. Developing contingency plans for both rapid growth and decline. Investing in Open Government and Smart Citizens by sharing community data and engaging citizens digitally. Undertaking these actions can lead to reinventing Local Government for your community and helping them to determine why local government exists and what the role of government should be for the next generation.