Queensland: A service economy

Lots of people, notably including political commentators, imagine Queensland as a state dominated by mining and agriculture, and presumed to think and vote accordingly. I’ve just collected some statistics in response to a query made to the university, and I thought they might be of more general interest.

Like Australia as a whole, the Queensland economy is dominated by services. As this table shows, agriculture and mining each account for about 2.5 per cent of total employment. This is marginally, but not significantly, more than for Australia as a whole (2.4 and 2.0 per cent)

Agriculture and mining together account for less jobs than service industries you might think of as relatively minor, such as Professional, Scientific and Technical Services or Administrative and Support Services.

Even adding in manufacturing, which, in Queensland, largely consists of processing primary products into outputs like food products and refined metals, the “old economy” only accounts for about 12 per cent of all employment. Health care and social assistance alone is larger

The primary production share of employment has declined over time, with fluctuations between mining and agriculture.  Development of new mines also accounted for significant employment in construction until about 2015, but this has now dropped off (hard to extract from the data, but easy to see by looking at the pace of new development)

Mining is a significant, but not critical source of revenue to the state government, yielding $5 billion out of a total of $58 billion. However, the Grants Commission takes access to royalty income into account in allocating GST revenue, so the actual benefit to Queensland is smaller than the $5 billion figure would suggest.


20 thoughts on “Queensland: A service economy

  1. There are different images of Queensland in people’s minds. Lots of people associate Queensland with sun, sand and surf. They think of the Gold Coast, Sunshine Coast and Barrier Reef, where you won’t find any mining or agriculture.
    It”s been a while since I was in Hastings Street, Noosa, but my recollection is that it was all shops, restaurants and hotel resorts, with not a farm or mine in sight.

    Come to think of it, there’s no mining or agriculture in Brisbane either.

    Of course, none of this is to deny the outsized political and social influence of the organisations who represent the interests of the mining and agricultural industries. There must be a psychological impulse, hard wired into our brains from prehistoric times, that convinces people that things that come from the ground are inherently more valuable than services we provide each other.

  2. “There must be a psychological impulse, hard wired into our brains from prehistoric times, that convinces people that things that come from the ground are inherently more valuable than services we provide each other.”
    Perhaps in some the Minerals Council of Australia chip has been inserted into the above circuit?

  3. Modern transmogrification via financial manipulation turns black rocks (Blackrock!) to gold.

    Just blinded by the light…
    “Gold is the color of wealth and class, it’s confident, perhaps too confident, boarding on arrogant and egotistical.

    “Gold is flashy, rich and extravagant, it is the ultimate color to symbolize luxury. It is also linked to divinity, gold has much importance in Christianity, it has similar meanings as the color white, meaning purity and the light of day. Other religions often display gold as it associates with knowledge, wisdom and learning. Gold like purple is also associated with royalty.
    https://colorpsychologymeaning.com/color-gold/

    Great movie too.
    “At first shaken by the loss, Howard, then Curtin, grasp the immense irony of their circumstances, and both share peals of laughter. 
    https://en.m.wikipedia.org/wiki/The_Treasure_of_the_Sierra_Madre_(film)

  4. JQ – out of the “revenue to the state government, yielding $5 billion” – I assume a year – how much will be absorbed by externalities and hand outs and transition costs considering your states 5th place in pollution race to the bottom please. Or link?

    Today.
    5.CS Energy – 14.7 million tonnes (Position in 2016/17:5)
    “The Queensland state-owned generator runs three coal-fired power stations, Callide B & C and Kogan Creek. It also owns the Kogan Creek coal mine.”
    https://www.smh.com.au/business/the-economy/the-dirty-top-ten-these-are-australia-s-biggest-polluters-20190228-p510u5.html

  5. Wow if you just take public admin, education and health care that’s 30% of the work force that are likely directly government employed (or paid by at least).

  6. Thanks ProfQ.

    I’ve often heard it said that primary industry in Australia, despite employing relatively few people, is still of outsize importance to the economy because of its export income. I don’t really know what to make of this, and would be interested to hear your view of it.

  7. @Duncan Yes, the public sector share of GDP is about 30 per cent. Is this news to you?
    @Tim It doesn’t mean anything much, except to the recipients of the income. In the case of coal, these are mostly global corporations or very rich Australians. For the rest of us (excluding the handful of employees), it’s only the royalties and the (very modest) company tax payments that matter. The idea that export income is more valuable than other kinds is a relic of mercantilism.

  8. What about the role of mining and agriculture as linchpins to the economy? Beyond gross proportions of employment and state GDP, is the relationship of these industries with other areas of the economy critical to to the state’s economy as a whole? Without these industries wouldn’t there be a slow knock on effect as support industries went which effect general service industries? As certain economies of scale are no longer justified by falling demand wouldn’t large gaps be left?

    I would say that this would certainly happen in the regions. You can’t tell me that all of the state west of the Great Dividing Range isn’t utterly dependant on primary industries.

  9. Austrade seem to have some data on the component of exports eg “while exports of goods declined in value terms (down by around 4.5 per cent) over 2015-16, exports of services delivered a third consecutive year of near double-digit growth, rising by nine per cent.”

    I read some time ago the the $value of education was greater than that of wheat. You would think that education would drive more local employment than wheat and be a factor in decentralising major urban centres.

    https://www.austrade.gov.au/news/economic-analysis/australias-export-performance-in-2015-16

  10. The linkages to downstream processing, transport and retail are significant. The linkages as purchases of capital and goods would not seem to be major given the small share in employment. Of course there is something valuable in being able to have some self-sufficiency in food – at least at the national level. I think there are significant externalities associated with these sectors – particularly those bearing on non-human life e.g. land clearing and Barrier reef damage, CO2, methane and nitrogen emissions. But we have to eat and not many of us want to go vegan.

    Exports are an important autonomous component of demand so that international fluctuations in demand and terms-of-trade shocks matter.

    I am amazed at the size of Queensland as a state. I have now driven across it twice, north to south. It is so vast and unpopulated – even in the central southern areas but also in the west and the north. Even driving through the central west there is farming, mining and little else.

  11. Western QLD has always been desolate. Old farms are being aggregated and original buildings are left to fall apart, management is by remote means and teams of contractors, who have self contained mobile living facilities, move from one property to another to process animals.

  12. @Anonymous “Linchpin” is a meaningless word in this context. It’s certainly true agriculture is important in rural areas of Queensland, as it is in rural areas everywhere. That used to be true of mining, but these days mining jobs are mostly FIFO. In the unlikely event that Adani goes ahead, it will contribute only modestly to the economy in Townsville and Rockhampton and not at all to anything west of the Great Dividing Range.

  13. Services are a broad category. Once, services were thought of as essentially pertaining to the domestic economy, which is no longer the case. Education and tourism are obvious cases of services increasingly linked to the international economy. Thinking about shares helps understand changes in the overall economy but has limited usefulness in economic policymaking for specific parts thereof.

  14. What I sometimes ponder is the economic disconnect between proportion of GDP and criticality to the rest of the economy. Agriculture might be just 5% of the world economy, however the other 95% of the world economy absolutely depends on agriculture. No food equals no humans equals no economy, to state the obvious.

    There might be another segment of the world economy which is non-essential but also 5% of world GDP. Let us say it is arts, entertainment and recreation including “recreational drugs” legal and illegal. Remove agriculture and we all die. Remove these others and a few would die, a few would rant and rage, but the great majority would adjust and, very probably, find something more constructive to do with their spare time. Thus, the market value of something really does not reflect its essential value to humans nor its importance to the rest of the economy in terms of dependent links.

    Market values in an advanced economy essentially reflect the values of heavily satiated humans but these values bear a very poor relation to the real survival value of essentials to humans. In this view, we can see the market (the unregulated market) fails to value essential or fundamental values. If the market fails to value fundamental values properly (good human health, good environmental health for example), under conditions approaching the asymptote of general satiation, then how can such a market be called “efficient”, unless we mean it is efficient at depleting resources and destroying the environment for non-essential purposes?

  15. Andrew Blakers’ scenarios for a 100% renewable NEM call for 500 Gwh of pumped hydro in Eastern Australia, The world’s biggest pumped hydro plant at Bath County in Virginia stores 24 Gwh with peak output of 3 GW. So Australia may well need about 20 of these, or 200 smaller 2.4 Gwh plants, or 2000 tidgy 240 Mwh plants. (Recall that Tesla’s much-hyped battery in South Australia is only 130 Mwh). A good number of these will presumably be in Queensland. I wonder if the skilled labour exists for this. The USA is more fortunate in a way, as the place to build more Bath Counties is the same Appalachia where the first one is, with plenty of unemployed miners looking for heavy manual labour.

    BTW, Bath County’s two storage lakes cover 332 hectares between them. 6,000 hectares of reservoirs in a country the size of Australia should not be a real problem. They aren’t much good for recreation because of the frequent depth changes, but you can SFIK stock the bigger of the two reservoirs with fish. These are off-river plants running in a semi-closed cycle; you need nearby streams for topping up.

    Sure you can get round the need for pumped hydro with magic unicorn dung. The best two bets at present seem to be V2G, using millions of car batteries as grid resources, and P2G storing hydrogen or synthetic ammonia or synthetic methane. The Eztel salt caverns in Saxony can hold the equivalent of 3,000 Gwh on natural gas (as far as I can find out). Australia would only need one-sixth of an Etzel. But it should make a start on the dams soon, as these are not quick to build.

  16. IMO agriculture’s apparent sainthood is undeserved. A quick look at global economics – those countries whose economies are largely agricultural also tend to be more exposed to poverty, corruption and a lack of human rights. More developed economies rely less on agriculture and more on “services”, whether they be entertaining or educating is irrelevant.

    As a girl once told me, man doesn’t live on bread alone.

  17. rog,

    Nobody sensible is “sainting” agriculture. Our economy is a complex system with many inter-connected, inter-dependent processes. Modern agriculture depends on modern energy systems and modern manufactures. People depend on services, including health, welfare and education, as well as on food, for life and quality of life.

    However, the points I raised in my March 1 post still stand.

    There is an apparent value disconnect between proportion of GDP of a sector and its real criticality to the rest of the economy and indeed to human survival. There is also the fact that natural capital and nature itself (as a sustaining biosphere) is inadequately valued. This disconnect illustrates that money values in our current system are often unrelated to fundamental or essential values for both humans and nature. Market failure is the proximate (near or immediate) cause of this disconnect. Ownership failure is the distal cause. By “ownership failure” I mean a failure to construct ownership rules correctly.

    J.Q. has discussed the construction of ownership in the past by referencing John Locke and property rights. J.Q. has pointed out correctly, and he’s not the first, that how we construct property rights (ownership rules) plays a central role in constructing both our society and our market system(s). If one is making an argument that ownership rules are wrong then this will be on the basis of one or two of two possible standards. The first set of standards will come from ethics or moral philosophy and is contestable. The second set of standards perforce will come from the discovered physical and biological laws of the world and these standards are not contestable.

    To clarify terminology, when I refer to human laws and customs I call them “rules”. When I refer to natural laws (the laws of thermodynamics for example) I call them laws. We can change rules but we cannot change laws. Our legal laws are rules (including property rights). They can be made one way or made some other way. We can make these rules anyway we wish except that they are not operable when they run counter to natural laws. As an example, from criminal law not ownership law, we can make a legal rule which implements capital punishment. It is possible to kill people. We cannot make an operable legal rule to resurrect people long after they were incorrectly subjected to capital punishment.

    It’s a slightly more complex argument (though still easy enough) to show the following. We can make rules of ownership (and accounting) which implement percentage returns on ownership of capital. This leads to the potential exponential growth of competing capitals and indeed of capitalism itself. This rule of implicit endless capital growth is in conflict with the obvious and scientifically attested fact that the world (biosphere) is finite. Our rules of ownership (current property rights for productive capital) are in conflict with the real laws of the world. This is a case where the rules remain operable for a time but will eventually run up against real system limits.

    If I can refer to Mises as an extreme example of the axiomatic method in economics, his approach is egregiously wrong but wonderfully illustrates how his economics and also that of crude classical or neoclassical economics are of a non-ontological nature. Mises uses an axiomatic-deductive method. His axioms are “self-evident truths” according to his apologists. However, his axioms are not self-evident truths. They are simply a priori justifications, as indeed are the standard ownership axioms of conventional economics. From there, such reasoning develops into what one might call deontological economics. Another term might be normative economics. It’s an economics which says how ownership and hence economics should be constructed. It also says essentially that no notice should be taken of real systems nor of the two-way effects between real systems and economic systems. Therefore it operates to destroy real biosphere systems; natural services, bio-services, species and ecologies.

    I can make the argument in the last two sentences above precisely because the real world evidence supports what I am saying. The biosphere IS being destroyed. This is now a matter of known scientific fact. In both philosophical and complex systems terms, one can prove that an axiomatic or formal system with rules of operation that are in conflict with natural laws and which yet seeks to manage real quantities according to its axioms, cannot be an operable or least cannot be an indefinitely operable system. Essentially, the same reasoning holds for capitalism as holds for any design of a perpetual motion or perpetual growth machine. The design, if put into action, cannot run indefinitely in contravention to natural laws.

  18. For anybody interested, there are regional input-output tables for Queensland that provide interesting details about the make-up of inter-regional as well as interstate and foreign exports:

    http://www.qgso.qld.gov.au/products/reports/qld-reg-io-tables/index.php

    The catch is that they’re from 1996-97, although the broad picture they paint probably remains largely unchanged.

    It’s certainly true that services dominate economic activity, and that at the national level there’s no economic logic in favouring policies that increase export earnings over those that would improve the efficiency of markets that are largely domestic (and which may be important as intermediate inputs to export industries, at any rate).

    But precisely because so much economic activity is comprised of ubiquitous service industries, generally serving local or regional markets with little inter-regional or longer-distance trade, primary production plays an outsized—though diminishing—role in determining spatial patterns of employment and economic activity within the country. This is obviously of great significance to sub-national governments.

    This issue is most acute outside major cities and regional service centres (and away from tourism destinations), where increases in local services employment are often not enough to offset the long-term decline in primary production and manufacturing jobs—too much services activity is subject to significant economies of scale or agglomeration economies and has a regional (or larger scale) focus.

    Regional centres can certainly thrive as their quintessential role matches the economic zeitgeist, but their futures are still tied to the those of the hinterlands they serve.

    And even major cities can be vulnerable, as Perth shows. Back when it was booming, there was plenty of commentary to the effect that Perth was doing well because it was a great location that was effective in attracting investment and talented workers. Its focus just happened to be on providing specialised business services for the mining industry, but its economic performance wasn’t tied to Western Australia’s mining regions, which weren’t that close anyway. Such hubris seems laughable now.

    Getting state governments (except New South Wales and Victoria) to look beyond export staples such as primary production requires more than pointing out their limited contribution to employment and output. It requires some of the following:

    * making a plausible case that the efficiency with which intermediate inputs and consumer services (including, crucially, those provided by governments) are produced can materially affect the locational decisions of firms and workers, and that material increases in this efficiency are a plausible outcome of improvements in state government policy

    * using inter-governmental arrangements to stymie beggar-thy-neighbour competition between states

    * moving relevant decision-making powers to the national level

    * getting state Labor parties to focus on the welfare of workers, who in a national labour market have a shared general interest in wage-boosting government investment, not an interest in the boondoggles that benefit homeowners and natural resource owners. This may mean accepting that the best opportunities for some workers will not necessarily be located in a given region or even state

  19. John. Belatedly. You might think about developing some ideas about labour markets in service industries for your Keith Hancock lecture. Outside my professional interests I know but most debates about wages policy in Australia seem to have been conducted in terms of manufacturing industries where productivity can be measured, and when unions were strong. Not that productivity measurement is ever straightforward.

  20. This disconnect reminds me of the Banjo Patterson poem “Clancy of the Overflow”. My ancestors were all farmers, even the ones in Ireland, so my genetic memory is wired to overvalue the importance of country over city production. My only real observation is on the disproportionate effect that export demand for our mining outputs seems to have on the exchange rate. This, of course, is a two way door because our exchange rate also impacts on that very demand. International competitiveness is not discussed much these days but may become more important as our service industries assert their dominance on the global trade NET Exports outcome.

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