State Economy Stutters through 2016/17
This morning’s ABS data revealed activity across the Queensland economy reached $309 billion during 2016/17, growing by 1.8% over the past year.
Growth in Queensland lagged the national average of 2.0%, behind New South Wales, Victoria and the Territories as the fastest growing regions in the past year. As a share of the national economy, Queensland contributes 18% of the nation’s $1.7 trillion in economic output.
Following the release of the national accounts data in September, we provided commentary on the QLD economic outlook (See here https://www.cciq.com.au/news/cautious-economic-optimism-for-201718/ ).
Previously, we anticipated the state accounts would show growth in Gross State Product (GSP) of 2.5% based on published data available in the national accounts and balance of payments. It was expected growth would fall short of Treasury forecasts by a quarter of a percentage point.
Alarmingly, the actual rate of growth was a full percentage point lower than the treasury forecasts published in the state budget. These treasury forecasts form the basis for the revenue and expenditure decisions by the government of the day.
Slower growth undermines job creation, weakens business confidence while exacerbating existing budgetary pressures. With debt projected to balloon out to $81 billion, the next government will be keen to see the economy speed up.
This latest data complements the quarterly national accounts data and provides further detail on the state’s trade performance both internationally and with other states. The data also provides insight into the performance of the state’s industries.
Decomposing Gross State Product into its various components, the growth in State Final Demand contributed 2.6 percentage points to growth, while international trade added a further 0.4 points. A slump in interstate trade severely hampered growth levels, subtracting 1.1 percentage points from overall growth levels.
The Queensland economy is diverse. The state is well renowned for its world-class resources and agriculture industries, however, the services industries continue to be a major source of growth and employment. The chart below illustrates how industries have grown over the past decade and their relative importance to the labour market.
In the past year, the agriculture sector was the strongest performing industry, rebounding by 11% after a difficult year in 2015/16.
Across the services industries, Health Care and Social Assistance continued its remarkable growth trajectory, expanding a further 7.2%. The rapid in growth in the healthcare industry has been proceeding for several years now, expanding a cumulative 28.8% over the past three years. Already the largest employing industry, it also had the strongest numbers of jobs growth over the past year.
Other services industries such as Financial and insurance services, Professional, scientific and technical services, Arts and recreation services, Rental, hiring and real estate services, Wholesale Trade and Transport, postal and warehousing were all among the industries contributing with above-average growth.
However, the state’s performance was hampered the poor performance of larger industries such as construction and manufacturing which shrunk by 2.8% and 3.0% respectively. Growth in the mining industry also slowed sharply to 1.8% after averaging growth of 4.6% over the past decade.
Throughout this election campaign, CCIQ is looking for candidates to put forward the policies to help kick-start growth across the state. In particular, we encourage the major political parties to deliver on the policy front in three areas.
- Infrastructure Investment,
- Innovation, and
- Tackling the rising levels of government debt.
The latest data reinforces the need to get the policy settings right to help grow the economy and employ Queenslanders.