QTPA Member Alert | Australian Economic Developments (23 November 2012) (28/11/2012)

Australian Economic Developments (23 November 2012)

As previous the following timely information is passed on to Turf Queensland members for their information and use when comparing the various state economies and how Queensland is travelling.

The Reserve Bank of Australia (RBA) released the minutes from its November Board meeting this week. The Board’s latest assessment of the Australian economy is that growth ‘had slowed from an above-trend pace earlier in the year, with recent indicators of activity suggesting that economic growth was more moderate in the September quarter’. This view was largely supported by the data that was released this week. In particular, the Westpac-Melbourne Institute Coincident Index implied an annualised GDP growth rate of 2.6% for the September quarter, well below its long-term average of 3%. And the DEEWR monthly index of internet job advertisements fell another 2.5% m/m, in line with the ANZ and SEEK job advertisement series, released two weeks ago. There are some signs starting to emerge however, that the interest rate cuts seen over the past year are starting to support spending in the household sector. The RBA noted that there are signs that housing activity  might soon begin to lift, with national private residential building approvals increasing in recent months and auction clearance rates in Sydney and Melbourne also rising. On the inflation front (since  inflation is what the RBA must target in its moentary policy settings), the RBA confirmed that it still expects the introduction of the carbon price in July 2012 to boost underlying inflation by around ¼ of a percentage point for the year of 2012-13, and headline inflation by around 0.7 percentage points. The RBA is widely expected to ‘see through’ these one-off carbon price impacts when making its policy  deliberations. On the immediate outlook, the November Westpac-Melbourne Institute Consumer Sentiment survey released this week showed that Australian consumers are again taking a cautious approach to their Christmas spending this festive season, with most looking to spend the same or less than last year, and a notable reduction in the average budget for gifts.

Productivity remained the issue of choice for Australian economic policy-makers this week. Both Glenn Stevens (RBA) and David Gruen (Treasury), gave speeches this week that reiterated the outstanding list of policy reforms recommended by the Productivity Commission for improving productivity levels in Australia.

Performance of the State Economies in 2011-12

The Australian Bureau of Statistics released the annual State Accounts this week which provide detail on the performance of the main state economies in 2011-12. A brief summary of the performance of the mainland states in 2011-12 is provided below.

New South Wales – Gross state product (GSP) grew by 2.4 per cent in 2011-12 which is slightly above the average rate of growth seen over the past 10 years. In 2011-12, New South Wales recorded reasonable growth in private consumption (2.6 per cent) though investment grew by only 1.3 per cent over the year, in part reflecting a decline in private dwelling investment of 8.7 per cent. International exports expanded by 5.0 per cent and imports rose by 7.7 per cent. Public expenditure made only a modest contribution to growth, growing by 1.1 per cent over the year, while the finance & insurance sector was the largest contributor to growth over the year (0.5 ppts).

Victoria – GSP grew by 2.3 per cent in 2011-12 which is below the average rate of growth seen over the past decade. In 2011-12, Victoria recorded solid growth in private consumption (2.9 per cent) though private investment grew by only 1.3 per cent over the year, in part reflecting a 2.0 per cent rise in dwelling investment. International exports expanded by 3.7 per cent and imports rose by 4.6 per cent. Public expenditure made only a modest contribution to growth, growing by 1.1 per cent over the year, while the health care & social assistance was the largest contributor to growth over the year (0.4 ppts).

Queensland – GSP grew by 4.0 per cent in 2011-12 which is in line with the average rate of growth seen over the past 10 years. Queensland reported strong growth in private consumption (4.4 per cent) and investment which grew by 26.7 per cent over the year. The large rise in private investment largely reflected strong growth in mining-related investment, while private housing investment was  broadly unchanged. International exports expanded by 4.5 per cent and imports rose by 15.6 per cent, reflecting the import intensity of mining investments. Public expenditure made only a modest contribution to growth, growing by 1.3 per cent over the year, while the health care and social assistance sector was the largest contributor to growth over the year (0.5 ppts).

South Australia – GSP grew by 2.1 per cent in 2011-12 which is below the average rate of growth seen over the past 10 years. South Australia recorded fairly soft growth in both private consumption (1.4 per cent) though slightly stronger growth in private investment of 4.9 per cent. International exports expanded by 2.1 per cent and imports rose by 7.3 per cent. Public expenditure made only a  modest contribution to growth, increasing by 1.5 per cent, while the finance and insurance sector was the largest contributor to growth over the year (0.4 ppts).

Western Australia – GSP grew by 6.7 per cent in 2011-12 which is well above the average rate of growth seen over the past 10 years. Western Australia reported strong growth in private  consumption (5.9 per cent) and investment which grew by 26.9 per cent over the year. The large rise in private investment largely reflected strong growth in mining-related investment, while private housing  investment fell sharply. International exports expanded by 4.3 per cent and imports rose by 23.5 per cent. Public expenditure recorded modest growth of 5.8 per cent, while the mining sector was the largest contributor to growth over the year (2.9 ppts).