Structural change forecast for the Hunter
The Hunter economy is heading into another period of substantial structural change according to the December 2013 Quarter Hunter Region Economic Indicator released by the Hunter Valley Research Foundation. The price of black coal appears to have plateaued at a level that does not compel drastic closures, nor enables substantial new investments. As a consequence, the construction inputs to the sector continue to decline, while production continues to ramp up.
The qualitative evidence suggests that in the wake of this trend many aspects of the local manufacturing sector are struggling to reorientate to new sources of demand. Business sentiment has improved, but there appears little momentum in other sources of private business investment at present. Despite these challenges, the latest data suggest that the regional labour market is holding up well.
Part of the reason lies in the declining participation rate, it is possible that retention of a stimulatory interest rate position combined with depreciation of the currency is assisting new regional growth. The contribution from the housing sector is rising. House price growth has lifted and the leading indicators of dwelling construction have picked up. A housing upturn would usually coincide with a lift in consumption, but the evidence is mixed.
The declining Terms of Trade will see national decline and import prices rise. On the flip side, fewer overseas holidays, rising household equity and the reduced competitiveness of overseas on-line vendors will assist the local retail sector.
From a longer term perspective, the successful transition from resources based growth still looks precarious, both nationally and within the Hunter.
This edition of the HREI also raises some longer term issues, such as the potential impact of machine learning and progressive computerisation, the on-going influence of China, the ageing of the population and the productivity challenges facing the health sector. It is probable that these, and others, will transition the Hunter economy and community over the next ten years. Working with relevant regional stakeholders.
The Hunter Valley Research Foundation intends to play a greater role in understanding the complexities and drivers of this change, so that the Region can forge its destiny rather than lie beholden to these transitions.