TAS Excerpt from the 2012 May Market report


A wind farm and a dairy project are two multi-million dollar ventures providing a light on the hill, as the clouds gather over Tasmania’s job market

A tough start to 2012 has become even tougher for Tasmania, with a leap from 5.5% to 7% unemployment during February. The closure of factories and plants and the uncertain future surrounding mining sites are adding to the negativity already being experienced by the state’s housing market.

“The new 7% unemployment rate is probably an indicator that Tasmania doesn’t have the type of big investment projects getting the go-ahead that are helping the rest of the other smaller states, so it is being left behind,” says ANZ head of property research Paul Braddick.

“The Tasmanian population is only around 510,000, so closures of businesses will affect the unemployment rate more than in other states, like NSW, where you might have a population of 7.3 million.”

The bad news continues to roll in for the Tasmanian workforce.

At the end of 2011, BCD Resources announced the impending closure of its Beaconsfield gold mine in the state’s north, which was made famous by the rescue of two trapped miners in 2006.

Workers at the site are currently in the process of removing the available resources and once it closes, more than 150 jobs will be lost.

On an administrative front, the recent takeover of the TOTE betting agency in Hobart by the Tatts Group will result in job losses for 190 workers and contractors.

Recently, both BHP and Rio Tinto have suspended operations of smelting plants at Bell Bay, in the state’s far north, while the viability of operations there are reviewed. Around 1,000 jobs are at stake between the two sites and Andrew Peck, president of the Australian Property Institute in Tasmania, says nearby communities stand to be severely affected.

“Georgetown is an industrial based township, north of Launceston,” he says. “If either plant closed, let alone both, it would decimate the area, because that’s the sole employment base. There are roughly 3,000–4,000 people living there.”

Peck believes Tasmania’s problems will continue due to the cash strapped state government being unable to intervene. “The government is still about $200 million behind where they want to be in their budget and GST revenues are down,” he says. “Building approvals are still down and so are retail figures. With unemployment, the key economic drivers are still on the south side of positive. We’ve certainly got a soft outlook for price and we’re looking a bit shaky.”

Stemming the flow

Tasmania’s economic concerns are being exacerbated by a lack of job openings, which is forcing people to move away, according to Braddick.

“Tasmania is going to be pretty soft over the next 12–18 months at least,” he says. “The problem is that a lot of its younger people are heading over to the mainland looking for job opportunities and I think that will continue to be the case unless Tasmania can find some new angle, a new manufacturing project or major project to create employment opportunities.”

On the positive side, several new projects are underway that are set to improve employment in the state.

The recent approval of a $400 million wind farm in Musselroe Bay on the state’s north-east tip is expected to create around 200 jobs.

Another positive is a $70 million dairy development, approved by the Circular Head Council, in the state’s north-west. Located on the former Gunns sawmill site at Smithton, the project will produce powdered milk, boosting the dairy industry across Tasmania and creating around 150 jobs.

“It’s a huge holding and they’re cutting it up into a number of irrigated dairy farms on their own stand-alone basis,” says Peck. “On the back of it there’s a processing centre being built in Smithton itself. It will help make up for the McCain’s factory that shut down in the area.”

Peck also points to two mining projects as potential positives.

“There’s a proposed coal mine down at St Marys, at the eastern end of Fingal Valley,” he says. “It has already had a positive impact on the St Marys real estate market.”

Rate changes

Housing across Tasmania is continuing to struggle. Good performing areas such as St Marys and Smithton are enjoying positive fallout from new projects in the area, but such success stories are few and far between. Even what was described as historical lows in rental vacancy rates are now starting to suffer further as unemployment rises.

“The vacancy rate in Hobart is up from 2.2% 18 months ago to 2.9% now,” says Braddick. “That reflects the sharp slowdown we’ve seen in population growth.”

Rental yields are improving as rents continue to creep up while prices remain flat or falling, but Braddick warns against taking heart from such figures.

“It’s going to be tough for rents to do much in this type of market, especially with those vacancy rates going up again,” he says.

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