The new M9 Orbital Motorway and Badgerys Creek Airport will fuel biggest boom for Wollongong since the discovery of coal.
The first Illawarra Outlook lunch of the year hosted by The Property Council of Australia NSW saw MacroPlan director Brian Haratsis talk about the strong economic performance of the Illawarra and identify a variety of opportunities for growth in different sectors.
Mr Haratsis was very optimistic about the Illawarra economy describing it as a major centre for economic growth in Australia.
He said the region was on a upward trajectory, particularly in the tourism, health and education sectors.
“What I want to talk about..is perhaps the biggest boom since coal was discovered here by George Bass ..and what is likely to happen as a result,” he said.
“And something I would be chewing over is the increased centrality of the Illawarra over time and the increased connectivity particularly with the new M9 Orbital, Badgerys Creek Airport..and spill over from south-west Sydney.”
Mr Haratsis said it was not a question of if the boom would happen but when and how quickly?
He said it would be led by a rapid acceleration in the rate of change And in the medium term the bigger picture looked even better.
He said the end of the boom in mining and construction was a lot slower than people thought. But the growth in services is moving very quickly and Wollongong had the added advantage of being close to the Sydney which was the epic-centre for business and household services growth in Australia.
Sydney has 46 per cent of the national output in finance and insurance, 45 per cent of information and media and 35 per cent of professional and scientific services and they were driving the employment that was significantly impacting on the Illawarra housing market.
Freight and logistics is another sector that the Illawarra specialises in that is rapidly growing.
“The Illawarra economy is showing signs of significant improvement. Obviously BlueScope is an issue..but while it is important it is not that important to your economy any more. So provided there is a reasonable rate of change you won’t have anything to worry about. And the coal industry is the same. And given that Port Kembla is actually growing I don’t think there is anything to worry about. The growth in the services sector will far outweigh any of the losses in those sectors,” Mr Haratsis said.
Mr Haratsis said with an unemployment rate of 4.6 per cent the region was starting to adopt the same profile as Sydney. That told him the market was changing structurally. Health is the biggest industry and while metal production and manufacturing are still a leading employer others have caught up.
They include food and beverage, retailing, education and services.
“What we see is the transition is almost finished,” he said.
Future growth will be in the services sector particularly construction, freight logistics, accommodation and food services (tourism), professional and scientific, health care and social assistance.
Mr Haratsis said the decline in the other industries would be relatively modest and probably would not have a major net impact.
He felt the potential for population growth in a region so close to Sydney would more likely to be 2.0 to 2.5 per cent than the forecast 0.8 to 1.0 per cent.
To do that the Illawarra needed to get to a critical mass in its key industry sectors as quickly as possible.
So it needed to capitalise on the surge in services growth around Sydney.
One opportunity could be in health.
It is the fastest growing investment and employment sector in Australia but there are no strategic set of policies in the major cities around the location of such services.
Construction was growing but there needed to be more supply of land and development opportunities to hit some of the same peaks that have been achieved in the past.
There has been a sizable increase in dwelling approvals and Wollongong is at the start of the apartment revolution.
Mr Haratsis said when he looked at Rent.com Wollongong was the most searched destination for rent in the last six months in Australia.
“People are thinking about renting here, people are looking to rent and people can see jobs down here,” he said.
“And that is starting to translate into prices.”
Mr Haratsis said the right rate of change needed to be supported by the right policy frameworks and structures.
He said the dramatic growth in house prices in Sydney was also pushing people to this more affordable region and the growth in services in the Illawarra was pulling people here.
But he said it was important to not lose the region’s affordable housing.
“Don’t get sucked into a boom you can’t get out of,” he said.
“Once people have bought in a boom they won’t sell. It is really important to get supply right.”
With medium incomes in Wollongong 20 to 25 per cent lower than Sydney, so should house prices.
Mr Haratsis said with tertiary education the second largest contributor to GDP in Australia what was happening at the University of Wollongong and the innovation campus was sensational.
He said student numbers here were up 5.3 per cent compared to 3.3 per cent in NSW.
Mr Haratsis said with six per cent compounding growth in health expenditure in Australia he encouraged the Illawarra to deepen its investment in health.
“It is something that this region is very good at,” he said.
“You should be able to grow a specialisation which you could export to other region.”
And real expenditure on age care per person in Australia will increase by 44 per cent over the next two decades.
Mr Haratsis said Wollongong had so much more potential to become a major tourism centre for Australia.
Sydney has a six per cent growth in tourism numbers and the sector was expected to double in size within 10 years.
And Melbourne is running at 11 per cent because it worked out how to attract the rapidly growing number of Chinese tourists to Australia
Mr Haratsis said the growth in domestic visitation to Wollongong was very high.
But more investment in the industry, attractions and businesses will grow it further.
He said the other good news for Wollongong was Port Kembla was becoming increasingly important as a growth sector.
But one of the reasons why Mr Haratsis thinks the Illawarra is running into the biggest boom since the discovery of coal is because of the growth of south-west Sydney and improving connectivity.
“In the medium term you will not only have access to Sydney Airport but Badgerys Creek Airport. With the Orbital M9 it will be faster to get to Badgerys. And it will make the centrality of this region far more important. With an orbital road moving out that way you can expect the significance of Wollongong to increase dramatically. The M9 Orbital will effectively link Gosford to Wollongong on that major outer ring. In the medium term you should have a lot of confidence moving forward and building a diversified economy and really focusing on the service sectors you are good at. The M9 Orbital is a game changer for this area. Get yourself read because Wollongong will become the new Bronte by the Sea.”
Mr Haratsis said the region’s construction industry would be under pressure because of the rapid employment growth that is about to happen. But it could grow the sector substantially because of the trades background already existing in the area.
He said there would be many benefits to the increased regional specialisation in services the Illawarra was likely to attract.
Illawarra Outlook panel: Tim Jones, Jennifer Macquarie, Brian Haratsis, Jancey Malins and Mark Jones at the Property Council lunch at the Novotel Wollongong Northbeach. Picture: Greg Ellis
MacroPlan’s experienced and qualified economists align their understanding of macro-economic forces with micro-economic variables such as geographic and industrial characteristics, demographics, labour market shifts, resource demand and commercial realities. Contact Brian Haratsis – Executive Chairman today to discuss your property research requirements.