A few weeks ago we discussed the Queensland Treasury quarterly estimates of Gross State Product (GSP) and noted that they reflected a strong 3.3% growth for the 2015/16 year (see here). Yesterday saw the ABS release their own (annual) estimates for 2015/16 and these showed Queensland with just a 2.0% growth in GSP; so why the difference?
Firstly let’s note that in general the two measures move relatively well together (see chart below), although discrepancies are not unusual at an annual level.
Obviously there are different methodologies used by both the QLD Treasury, who estimate each quarter, and the ABS who provide State data only on an annual basis. As the notes to the ABS data reveal, there are differences in the way that the national accounts are estimated and the way that the State estimates have to be dis-aggregated from the national numbers. The ABS say “In analysing the chain volume measures it is important to recognise the data limitations at the state level and to be aware that the accuracy of the estimates will not be as high as that of the corresponding national estimates.”
Therefore we need to be careful when making comparisons between the ABS and the QLD Treasury numbers. Nevertheless it is worth making some general comments to help explain what appears to be a fairly large difference in the 2015/16 data.
Firstly let’s note that the ABS had QLD GSP growth in 2013/14 and 2014/15 as stronger than the Treasury estimate. Therefore their 2015/16 growth estimate is coming from a somewhat higher base than the Treasury number, and is therefore consequently a lower growth rate.
State Final Demand in the Treasury numbers fell 1.7% in 2015/16 while the ABS data had only a 1.3% drop. Therefore we must be looking at a lower measure of Net Exports in the ABS data than from the Treasury. And indeed that is what we find. In simple terms the ABS have State Final Demand about $7.5 bn higher than Treasury (with almost all the difference being seen in Household Consumption and Private Fixed Capital Formation) but they have Net International Exports $4.1 bn lower than Treasury. Overall the difference in GSP is that the ABS data is some $3.6 bn higher than Treasury, despite the slower growth rate.
The takeaway message here is that the QLD economy is recovering (on both sets of numbers) and that recovery is being driven by international exports as our LNG exports (in particular) come on line. Whether that growth is 3.3% or 2.0% is something for the pollies to argue over. Given the differences in methodology, and the inherent problems in disaggregating national data to a state level, we would suggest plumping for a number somewhere in the middle; let’s say +2.6%.
UPDATE. Gene Tunny at Adept Economics has done some excellent further analysis of the GSP data.