Between cyclones, floods, the high Australian dollar and the global financial crisis, Queensland has taken more hits than any other state in recent times. But things are looking bright for the sunshine state as it challenges Perth for the title of Australia's natural resources capital. Claire Cha_x001F_ffey reports

The hot, dry weather currently gracing Queensland is much like the calm before the storm. So far, it’s been the driest November since 1914 – but that all looks set to change.

Last week, the Australian Bureau of Meteorology (BOM) issued a forecast saying Australia will once again be subject to La Nina weather patterns this summer, and we can expect higher-than-average rainfall. Just like last year.

In December 2010, the flooding that would cause unprecedented death and destruction in Queensland began.

It persisted into January, affecting most of the state, and even claimed the capital, Brisbane, as a victim.

Then, in February, Cyclone Yasi bore down on the far north of the state, decimating communities and ensuring that the damage already done to the vital tourism industry would be signifi cantly exacerbated.

People lost their homes, businesses literally floated away, and the damage done – both psychologically and materially – put a crater in Queensland’s economy.

Almost a year later, the state is nowhere near to making a full recovery, and the BOM’s forecast has cast a shadow over the reconstruction e_x001F_ffort which is gradually ramping up.

“It is quite a frightening prospect for those people who were very badly a_x001F_ffected by the floods at the beginning of the year, many of whom are not yet back in their homes and many of whom are still trying to work through issues with insurance,” says the Queensland Law Society’s CEO, Noela L’Estrange.

“It would be incredibly di_x001D_ cult, if you had been through a very bad experience in February, to suddenly be in bed and have to listen to thundering rain on the roof and wonder whether it was all going to happen again.”

While the recovery process is certainly underway in Queensland, the scale of the disaster has ensured that much of the reconstruction is yet to commence and many people are still battling with insurance claims – which are not proving easy for either insurers or claimants.

Chris Ward, the managing partner of Queensland firm Cooper Grace Ward, says the fi rm’s work in recent times with a major insurer was an incredibly intense period for which no-one was prepared.

“For all the insurers, it was a huge process. You had the floods and then Cyclone Yasi in the space of a couple of weeks,” he says. “To be fair to insurers, their team levels are pitched at the medium, so to have that number of claims … there was just astronomical pressure upon them.

It has been a very intense process.” Cooper Grace Ward was also one of the fi rms working on the Queensland Floods Commission of Enquiry, which finished sittings two weeks ago.

A final report is due at the end of January. “It’s been something which has really captured peoples’ imaginations,” says Ward, “because most people were a_x001F_ffected in some way, shape or form.”

A three-speed economy

Queensland’s natural disasters have managed to differentiate the state in yet another way, with many locals saying it is now subject to a three-speed economy rather than the two-speed economy which generally describes economic activity across the rest of the country.

“I don’t think you could possibly say Queensland has a two-speed economy,” says L’Estrange, with whom Ian Dhu, the director of Brisbane-based Focus Recruitment, agrees.

“They talk about a two-speed economy going on generally in Australia, but my thoughts are that it is three-speed in Queensland,” he says.

“The small and medium enterprise (SME) sector is dead, or certainly subdued … The second speed is the professional services sector, which is cranking along quite comfortably and, in the main, servicing the corporate sector … [Then] the corporate sector – mining, resources, energy, and the spin-off areas related to those, such as infrastructure, capital raisings, regulatory and compliance considerations, IPOs, M&A, associated finance and the inevitable disputes – is ticking along very strongly.”

Accordingly, unless you happen to be a firm working in the energy and resources space, chances are you’re doing it pretty tough.

“We have a mining boom in large parts of the state, but we also have large parts of the state that depend on tourism, and they were very badly affected by the GFC, the rising Australian dollar, and the floods and cyclone earlier this year. And really, they haven’t recovered,” says L’Estrange. “That has a knock-on effect for the community at large, but also for lawyers.

Most lawyers operate in local communities; they operate in the suburbs and in regional and rural cities and towns … There are challenges in running and growing a successful practice in a slow economy.” And while Dhu is confident the struggling sectors will eventually recover, there is no doubt this will take time. “There seems to be some green shoots emerging and some renewed confidence, but certainly [the SME sector] is nowhere near where it was,” he says.

“Given the economic activity up here, and given the demographics and the people wanting to come to Queensland for lifestyle and opportunity … it is inevitable that the SME market will pick up but, at the moment, it’s subdued, and hence the demand for legal services in that sector is nowhere near where it was pre-GFC.”

Basking in the glow

For those firms that have clients in the energy and resources-related fields, however, life is very, very good.

In recent times, numerous significant projects that have been hovering in the pipeline – many of them related to LNG – have come on stream; essential infrastructure projects have been completed or are nearing completion; and investment in the energy sector over the next 12 months is estimated to be upwards of $80 billion.

According to Erin Feros, the head of Allens Arthur Robinson’s Queensland energy and resources practice, Queensland is on par with Western Australia when it comes to growth potential in this space.

“Queensland and Western Australia are really see as the growth areas for the firms,” she says. “In terms of numbers, we have traditionally had smaller offices there, but given the growth – based on resources, of course – my prediction is that you will see growth in the size of offices in Queensland.

“In the past, a lot of the work was driven out of Sydney or Melbourne, but … there are now a numberof international resources companies who are basing themselves in Queensland, so that attracts a lot of work, decision-making and the fl ow-on e_x001E_ ects for the legal services providers.”

Minter Ellison, which has the biggest Brisbane o_x001D_ffice when compared to its top-tier counterparts, is not surprised that other firms are now scrambling to boost numbers in their Brisbane o_x001D_ffices.

“We have been growing slowly over the last 10 years, rather than waking up yesterday and saying, ‘Wouldn’t it be a good idea to have a large Brisbane o_x001D_ ce’,” says Brisbane managing partner Ross Landsberg. “Our numbers of staff_x001E_ haven’t increased dramatically.”

While this strategy has placed the fi rm in good stead when it comes to being able to service clients with a well established talent base, Landsberg says that holding onto talent is a constant challenge in such a tight market.

“Everyone who is trying to develop their practice is also trying to employ our sta_x001E_ff ,” he says. “Most of our clients are upping their in-house corporate teams, and most of our lawyers have been o_x001E_ffered jobs by our clients on a regular basis. It’s no secret that those areas of work are developing in Queensland, so most firms are trying to increase their strength in that space.”

Whetting global appetites

If Queensland is experiencing such signifi cant growth in the energy and resources sector, are we likely to see global firms seeking to establish o_x001D_ ces in Brisbane as well as Perth and Sydney? Dhu seems to think so. “There is a sense of inevitability around that. That is what we are hearing,” he says.

“For the same reasons they are making their presence felt in Perth, I believe they are the same motivations that will lead them to Queensland. Queensland is geographically and economically proximate to the growing international markets of Asia and Asia Pacific and, specifically, active in the energy and resources sectors where the real corporate action is occurring.

The global firms are spreading their risk. There will be a presence in Queensland, maybe not their headquarters, but a presence.”

Not everyone, though, sees global arrivals as an imminent reality.

“Sydney continues to regard itself as the commercial centre of Australia, and it probably is. So, if you are an entrant coming into Australia, you tend to take the view that you can service the east coast out of Sydney,” says Landsberg. “But you realise that it is a hell of a long way

to Perth and, if you want to properly service the Western Australian market, it is pretty hard to do that out of Sydney.”

As such, says Landsberg, Brisbane is an unlikely option for global fi rms setting up small transactional o_x001D_ffices dealing in energy and resources.

“There is a hell of a di_x001E_ erence between bringing a transaction team into town for six to eight weeks to do a job, and going to the e_x001E_ ort of establishing an o_x001D_ffice,” he says.

Ward, too, says it is unlikely that firms such as Cli_x001E_fford Chance and Allen & Overy will set up shop in Brisbane any time soon – and this, he says, is from the horse’s mouth.

“I was in London only last month and met with the managing partner of Cli_x001E_fford Chance, who I got to now just for a cup of tea,” he says. “I did say to him, ‘What about Brisbane?’ My impression is that those international firms can operate purely out of Sydney or Perth. They don’t need to be in Brisbane, and he made it pretty clear that they don’t see any reason for being in Brisbane.”

Open doors

Despite this, however, Feros says Brisbane is becoming an increasingly attractive option for lawyers working in the energy and resources space who might not necessarily want to make the move to Perth.

“Perth is a really nice place, but we were recruiting over in the UK earlier this year to try and get energy and resources lawyers for our region, and a lot of them would consider the east coast, but not the west coast,” she says. “They have this mindset about Perth being distant.” According to Dhu, this coincides with an opening up of the Queensland labour market which, by necessity, is looking further afield for legal talent.

“Here in Queensland, we have traditionally been quite parochial and fi ercely patriotic. But, ultimately, necessity is requiring a mindset towards looking at legal talent that can not only be derived from interstate, but also from abroad,” he says.

“Lawyers with the right skills should keep an open mind about using their skills and qualifi cations to seize opportunities that exist up here, and not think that it is a closed shop anymore. For a long time, there was a belief that if you weren’t a Queensland lawyer, you may be behind the eight-ball. But organisations are now open to that fact that you don’t have to be attached to a Queensland practising certificate.”

Interestingly, this emerging “open market” has created a growing demand for Minter Ellison’s services in a previously quiet practice area: migration law.

As clients begin to realise just how much labour they will need to complete projects, says Landsberg, it is throwing up challenges not seen before in the sunshine state – and clients are asking for help.

“When we speak to a lot of our resources clients, they are starting to get their heads around the fact there is not enough skilled and unskilled labour available in Australia to do the level of work required in the resources sector over the next 10 years,” he says.

“It is a real challenge, in terms of how you manage both the migration process and the deployment and use of immigrant labour without creating a whole raft of social issues.

“This is going to be a signifi cant issue for Queensland and Australia over the next 10 years.”

Hope and pray

While Queensland is still facing its fair share of hardship – and everyone is keeping their fi ngers crossed that the state is not hit with yet more natural disasters over summer – there is a general consensus that the outlook for the next 12 months is largely positive.

“I am very optimistic about what is happening in Queensland,” says Feros. “More and more international investors are looking at Queensland, and there is a whole lot of infrastructure and new projects coming on stream.

So, based on the resources sector and things that flow from that, I have an optimistic outlook for Queensland, irrespective of what’s happening in the rest of the world.”

Landsberg agrees, and says it would take some kind of economic disaster to stall the numerous projects which are kicking o_x001D_ and which will provide a much-needed boon for the state.

“It would require a signifi cant fi nancial meltdown to derail most of the signifi cant projects in Queensland, because they are at a stage where the corporates involved have spent a lot of money, and they are all looking at long-run arrangements,” he says.

“If you spend $8 billion on an LNG plant, you’re really not worried about next year’s revenue. You are really projecting the next 30 years of revenue.”

Despite this, though, Landsberg predicts that the imminent state election, which will take place before the middle of next year, could potentially slow the economy – albeit briefly.

“At the moment, all of the polls suggest there will be a change in government. People are trying to get their head around what that might mean,” he says.

“For most of the larger projects, I think there is a bipartisan level of support. [But] if you have a change of government, there is a period of time in which the new government has to [adjust] … so you would expect a hiatus in government-related work for a period of three to six months.

“That tends to create a bit of a dip in the economy, but I think the fact that the major energy and resources projects are coming on stream will probably help smooth that through.”

As for Ward, while he says he is optimistic about Queensland’s future, focusing on what he can actually control is taking priority in such uncertain times. “I can’t control what happens in Europe or America, or what happens in the Australian economy, but I can control what happens here,” he says.

“So we can take control of our own systems, business development, profile, brand, client service imperatives, values and culture. They’re the things we can control. You have got to look outwards but, at the moment, I am making sure we work well within our own four walls. “After that, there is a degree of hope and pray.”