QTPA Member Alert | AUSTRALIAN STATE ECONOMIES COMPARISON REPORT JUNE 2012 (20/7/2012)

AUSTRALIAN STATE ECONOMIES COMPARISON REPORT JUNE 2012

A review of the Australian State Economies and their comparisons was undertaken in June 2012 by the Australian Industry Group.  The full report has some interesting reading and I have edited that for the Turf Queensland members use below.  It is interesting to review the comparison with different states especially if you happened to provide product to those states.  A recent Turf Alert provided a forecast of Building Construction in Queensland and the information in this report across all states tends to support that uplift and positive signs in building, all from a low base but at least it is turning.  Except South Australia and Tasmania who are both in all sorts of trouble, other states appear to be increasing in productivity and spreading across other sectors.  We must also remember that somewhere in the next 18 months there will be a Federal election.  It is interesting to see the diversity in employment trends across different sectors x state.

Current Conditions across Australia:

The Australian states continue to reflect the multi speed growth pattern that has been evident for some years with mining and other industries.  If anything, the gap is widening, with Western Australia outperforming all other states on almost every indicator quarter one (Q1) 2012.  This patchwork of growth is due to the combined simultaneous effects of: the mining investment boom; ongoing risks in the global economy (which is itself a multi speed story at present); current weak spot in the residential construction cycle; and significant changes in Australian consumer spending patterns.

The outlook continues to favour Western Australia and Queensland, which both have large pipelines of mining investment projects, while growth in other mainland states are generally expected to return to somewhere close to average growth by 2013-14.  Building and construction sectors all seem to be turning within the next 12 months based on indicators.

New South Wales:

• NSW remains soft with state and final demand recorded at the lowest growth rate of the mainland states in Q1 2012 and employment levels declining in the past two quarters and subsequently stabilising modestly in Q2.  The New South Wales Treasury expects a gradual pickup in household and business confidence, an upturn in the housing cycle and a pipeline of mining investment projects to help boost growth in real gross state product to around trend levels by 2013-14.  Building approvals indicate the New South Wales construction cycle may not have hit the bottom yet, even though the NSW Treasury expects gross state product to be supported by a recovery in dwelling investment, in response to tight rental market conditions, relatively low interest rates, continued population growth and increase measures in the State’s most recent budget to encourage new home construction.

The employment landscape indicates:

Victoria:

• Victoria has weakened noticeably during the second half of 2011, though it did rebound in the March quarter (Q1) 2012, with state final demand growing by 1.8% in that quarter and 2.7% over the year.  This recovery in activity has also been reflected in the most recent labour market data which showed a pickup in employment growth.  The Victorian Treasury expects growth in gross state product to pick up from the current low point of 1.5% to levels of 2.75% around at the decade average over the next couple of years.
• Private investment is only 0.4% higher over the year, in part reflecting the state of the housing market.  Housing investment is 1% lower over the year and building approvals which provide an indication of future housing investment activity at 20% lower over the year.  Melbourne’s average house price had the largest fall of any mainland state in the March quarter 2012.

The employment landscape indicates:

Queensland:

• Queensland is expanding at a strong pace due to international demand for the state’s natural resources.  State final demand fell via 0.8% in the March quarter 2012 go remains as 7.5% higher over the year driven in large part by private capital expenditure which is 23.2% higher over the year.  Queensland is itself exhibiting a strong multi speed pattern of growth, with rapid activity in the coal and gas regions countering eight tourism and residential construction downturn in the southeast corner.  The Queensland Treasury expects real gross state product to grow by 5% in 2012-13 and the unemployment rate to fall to 5.25%.  Growth is expected to be driven by a strong rise in both on ore and coal production due to significant expansions to mines and transport infrastructure.  The large LNG investment projects that are currently under way are expected to start to contribute to the economic growth of the state from 2014-15.  Building and Construction is expected to grow.  Deloittes Access Economics advises the following for Queensland:

• Private investment is 23% higher over the year; housing investment is 5.2% higher over the year and building approvals which provide an indication of future housing investment activity are close to 5% higher over the year.  Investment has been hampered by adverse weather events and other supply-side disturbances over the year as noted by the RBA in its May 2012 statement.

The employment landscape indicates:

South Australia:

• South Australia’s activity weakened during the second half of 2011, though looks to have rebound in the March quarter 2012, with state final demand growing by 1.7% in that quarter and 2.3% over the year.  The decline in State final demand towards the end of last year reflected a slowing/ending of Commonwealth fiscal stimulus funded projects and work on the Adelaide desalination plant or low private investment has since partially filled this gap in investment.  The South Australian Treasury expects gross state product and employment growth to pick up from current levels that remained below the average growth rate seen over the past decade.

• Activity has been supported in more recent times by private investment, which is 12% higher over the year to the March quarter 2012.  Housing investment is 2.1% higher over the year; though building approvals which provide an indication of future housing investment activity 14% lower over the year.

Employment landscape indicates:

Western Australia:

• In W. A. the State final demand grew by 8% in the March quarter 2012, led by 15% rise in non-residential construction, to be 15% higher over the past year.  The current high levels of investment are expected to significantly help boost production and exports levels over the coming years.  The West Australian Treasury currently expects real gross state product to grow by around 4.5% over the next 3-4 years, and the unemployment rate to fall to 4% over that period.
  Retail volumes were 9% higher over the year to the March quarter 2012 the strongest growth rate nationally.  Perth house prices declined again in March 2012 and moving closer to stabilising with residential building approvals still contracting at present pointing to a weakness in residential construction for some time.

The employment landscape indicates:

Tasmania:

• Tasmania has weakened significantly over the past six months, with state final demand falling by close to 1% over this period and employment falling by 1.8% over the year to March 2012.  Tasmania has the highest unemployment rate of any state at 7% in May 2012.  The Tasmanian Treasury expects a modest improvement in growth by 2013-14.  Until then, real gross state product is expected to grow at 1.25%, while employment is expected to decline further in the unemployment rate increased to 7.5% well above the expected national peak of 5.5%.
• Private investment is 2.3% lower over the year; housing investment is 10.5% lower over the year; and building approvals which provide an indication of future housing investment activity at 24% lower over the year indicating a disastrous time Tasmania.

The employment landscape indicates: