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Firms challenged by boom state

Firms challenged by boom state

A BIG-SPENDING budget in Queensland to support population and economic growth is continuing the bonanza for law firms in the state, but like the industries affected, servicing the demand is…

A BIG-SPENDING budget in Queensland to support population and economic growth is continuing the bonanza for law firms in the state, but like the industries affected, servicing the demand is likely to become even more of a headache.

With forecast growth in gross state product for 2007—08 of 5 per cent and more than $14 billion in capital spending directed at infrastructure upgrades after a long period of under-investment, competition for the work on offer is also increasing as local and national firms beef up practices in the state.

Government spending for this financial year is also almost 20 per cent above last year’s forecasts, due to additional outlays on water projects, roads and rail.

Chris Ward, managing partner of local firm Cooper Grace Ward, said although Queensland has been a boom state for some time, this budget was significant for the scale of new spending.

“It’s the size of it and the duration of it. It is a 20-year infrastructure plan, and it is across the state,” he said.

“For example, there’s Cairns Airport; there’s a huge amount of work up there. It includes work at Abbot Point and Dalrymple Bay, for the resource sector, and then down in the south-east corner, they are building dams and significant road infrastructure.”

Underlying the growth figures, he said the government is forecasting increases in tax revenue from stamp duty on property transactions, and therefore greater property movement.

“So in a base way, obviously they’re predicting, if anything, an increase in property transactions. So that’s obviously good for lawyers.”

Per capita, capital spending is the highest of any state or territory. The budget includes $2.5 billion to improve water infrastructure, $5.8 billion for main roads, $1.3 billion for Queensland Rail, $558 million for port upgrades, $619 million for education and training, $635 million for health and $2.8 billion for energy infrastructure.

The health sector will receive the biggest proportion of expenditure at $7.7 billion, representing 24 per cent of total spending, followed closely by education on $7.4 billion.

“They’re looking at about $6 billion [in infrastructure spending] initially,” Ward noted, “which will be in areas where there will need to be commercial activity; so that you will need to have basically a growth in those companies supplying the infrastructure. And they’re going to need lawyers.”

Ward said they are recruiting from large national firms, and were seeing at least one national firm increasing its size in Brisbane, but the competition for lawyers to meet their client’s demand would only increase.

“There is just not one inch of spare office space, so that indicates that there is a huge demand within Queensland,” he said. This led to another downside, which was the increase in the price of office space, on top of hikes in “human resources” costs, including what they needed to pay staff to attract and retain them.

Jonathan Shaw, partner in charge of Blake Dawson Waldron’s Brisbane office, said the market had been expecting this increase in spending on infrastructure for some time and they had been building their numbers to cope with increased demand.

“From our perspective this investment is something that we had anticipated going back some years and we have been developing our expertise to align what we saw as the requirements in the market for legal services,” he said.

He confirmed that “capacity” to service clients was an ongoing issue for all law firms there, but he said the scale and sophistication of the work now on offer in Queensland was likely to keep more young lawyers in the state, and attract specialists from elsewhere.

“The great thing is that these projects require specialisation, and they require high levels of expertise and the Queensland legal market is developing high levels of expertise, which previously it might have had to go south to the Sydney and Melbourne markets for,” he said.

His office, which has 85 lawyers, now had 10 more practitioners than they had budgeted for at the beginning of the year, he said, and there will be four additional partners by the end of next year.

“We are getting a lot more enquiries from down south in terms of sourcing good team members,” added Ward. “But there will be pressure to keep your good team members, to ensure that your team’s happy because there will undoubtedly be a significant burst in the market.”

He stressed, however, they had to make sure clients are also happy with their performance as law firms couldn’t just assume they would see an influx of new work.

“What’s the opposite of this? A recession, and they are really hard to handle. But in some ways this is just as hard to handle, because it is a window of opportunity and you have to make sure you are able to deal with that opportunity,” he said.

Much of the spending will be financed via increased borrowing, and the operating surplus of $2.4 billion for 2006—07 will be reduced to $268 million by next financial year.

There are a couple of projects pending that will use a public-private partnership (PPP), but the Queensland Government has largely shied away from these as a way to build major infrastructure.

Ward agreed PPPs in general lead to more work for lawyers, but said this was perhaps more of a concern for larger firms, which were more likely to benefit from these.

“Even if a PPP [isn’t used] there is still going to be an enormous amount of interplay between government and the various players that are going to be working with them on these projects.”

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