Introduction

The Alice Springs Economic Profile tells, for the first time, the story of the Alice Springs economy. The Alice Springs Economic Development Committee and the Department of Business, Economic and Regional Development (DBERD) partnered to produce this profile to provide the starting point for discussions between the community and the Government about the future development of Alice Springs.

The profile, a project recognised under the Northern Territory Government and Charles Darwin University Partnership Agreement, has demanded rigorous economic research and analysis. Six months of data collation and analysis, from November 2007 until April 2008, has been required to ensure that the profile provides the most complete picture of the Alice Springs economy as possible.

There are challenges with a project of this scale, one of which is being able to access all the required data. Where gaps have been identified other possible sources of information have been sought.

It is important to recognise that the profile is, first and foremost, a snapshot in time. The lasting image it creates is that of an underlying confidence in the Alice Springs economy and the firm expectation that this is to continue.

Approach

The development of this profile was a three-stage process. The first stage involved undertaking a desktop search of economic information relevant to Alice Springs from reputable sources.

The second stage was a major survey of Alice Springs businesses to determine the key characteristics of their business and business performance. This included identifying their expectations for the approaching 2008 trading year.

The final stage was to construct a narrative that brought all of the information together to form a cohesive description of the economy, which includes not only surveyed data but also draws upon Australian Government and administrative data sets.

Economic Environment

As with all economies, geography is a critical factor to consider. This is no different for Alice Springs.

Alice Springs is a remote economy servicing a vast area of inland Australia, including parts of Western Australia and South Australia.

It is a stand-alone economy in many senses, but even so, it is impacted on by national and global markets.

During the development of the profile, the Reserve Bank of Australia lifted Australian interest rates three times. This was further compounded by the considerable uncertainty on equity markets driven by financial crisis in some key international economies.

The Economy

Alice Springs is a broad based economy, supported by a significant diversity in its industry sectors. The top seven industries contributed approximately 52 per cent of the regional output to Alice Springs.

This industry structure is generally a recipe for economic stability and recent history in Alice Springs confirms this.

There are more than 1800 businesses in the town, with the majority being micro and small business.

Government is a significant player through both administration and Defence. Over 58 per cent of businesses were affected by seasonality. The strongest trading occurred between July and September, and weakest trading between January and March.
Business at all levels and in all sectors reported considerable confidence for the 2008 trading year and sales and profits are expected to rise. Seventy-nine per cent of businesses were extremely or fairly confident of strong business prospects in 2008. Sixty one per cent of businesses surveyed expect an increase in profitability in 2008. Seventy four per cent are expecting an increase in sales, while fifty seven per cent are expecting to increase their workforce. Fifty three per cent are expecting an increased wages bill while forty one per cent are expecting to increase their prices. Thirty five per cent will increase their capital expenditure.

There are key economic challenges for Alice Springs. One challenge is the ability to build a workforce in a community which has seen a decline in both the population generally and in the workforce specifically. There is a low unemployment rate, high labour force participation, and a significant number of vacant positions at any one time. Even given these challenges, businesses expectations are still positive.

The profile suggests however, that average wages in Alice Springs have not kept pace with the rate of wage increases either in the Northern Territory or nationally. This is not an uncommon challenge for regional economies, like Alice Springs, which are strongly based on micro and small enterprises.

The only sustainable way to increase wages into the longer term is to build the productivity of the business sector. As a relatively stable economy, Alice Springs provides a good foundation to build on that over time.

Investment is a key to growth, competitiveness, sustainability and increasing productivity. There is no direct data on investment flows in Alice Springs and clearly this is an area where more work needs to be done to determine the strength or otherwise of those flows over time.

Anecdotal evidence suggests that there has been considerable investment at the business level in recent times.

There are a number of new projects in ‘the pipeline’ that will add to the capacity of the region.

Some of these include -

• Owen Springs Power Station – estimated $57m
• Solar Cities – estimated $37m
• Solar Demonstration Facility – estimated $2.55m

Conclusion

This profile is an important source of information on the Alice Springs economy and will be a good reference point for the discussion about its economic future.

The outlook for Alice Springs is positive, though it is expected that there might be some tempering of the very strong confidence levels as a result of global uncertainty, particularly for those industries exposed to the external sector.

The diversity of the structure of the economy is a strong positive that brings stability and is a precondition for long term investment.

There are some concerns surrounding the competitiveness of the labour market and as a consequence, the number of workers that will be available.

The Alice Springs Economic Committee and DBERD wish to thank all those that participated in this project and particularly the 374 business people who gave up their time to participate in the business survey.

You have provided an invaluable insight into the business perspective. [read more]