Data released last week by the Queensland Treasury shows the state’s economy grew 1.2% in the second quarter of 2016; the fastest pace of growth since Q1 2012. While Queensland Treasury release their Gross State Product data on a quarterly basis the ABS only do so annually (and we must wait another three weeks until they release the state data for the second quarter), so there is inevitably some debate, generally along party lines, as to whether we can believe in the Treasury numbers. As we have said in the past, we can see no reason not to. Indeed the first chart below indicates that, whilst there are some differences between the annual QLD Treasury and ABS data, they are generally very similar and we would therefore expect the ABS data to confirm the pick-up.
The Treasury numbers show Gross State Product (GSP) rose by 3.3% for the year 2015/16 (up from growth of 0.8% in 2014/15). The reason for this return to growth can be laid fairly and squarely at the feet of our exports. When we consider the Gross State Expenditure (i.e. stripping out the impact of imports and exports from and to the state) we see growth of just 0.5% (although this is only the second quarter of positive growth in this measure in the past 10 quarters) for the quarter and a decline of 1.7% for the year.
With our net export position moving from a $14 billion deficit in 2014/15 to a $0.3 billion surplus this year, it is little surprise that GSP growth has picked up. Annual GSP is running at approximately $311 billion this year (up from $301 billion last) so it’s clear that the swing in net exports of over $14 billion has been the main driver. Indeed while household expenditure (the major component of Gross State Product) rose 2.5% over the year, this is the slowest pace of growth since Q1 last year. The second chart below also makes clear the dramatic, and continuing, slowdown in private investment which hit its lowest level in six years this quarter and is down 15% for the year.
The Treasurer’s comment on the data (see here) acknowledges, at the end of his statement, the impact that exports have had on Queensland’s growth but also tries to talk up the non-export related sectors such as dwellings investment and household expenditure. We have already noted that household expenditure growth is actually relatively weak (and weakening) and the more recent slowdown in building approvals data (see here for latest commentary) could point to a slowdown in this sector in coming quarters.
Forecast strong growth in Queensland will be relying heavily on further impressive growth in our net exports unless we can see the non-mining sector start to increase investment, and improved confidence spur further household expenditure.