There is a certain narrative doing the rounds that although the Queensland economy is recovering it is doing so largely on the basis of booming resources exports and government spending; that the private domestic sector is struggling to add to growth. There is unquestionably a valid point being made about the impact of net exports on the state’s Gross State Product data.
However, when we consider the State Final Demand data (i.e. the domestic element) we see a rather different reality to that being suggested by some. A dig around in the Trend data released on Wednesday shows us that in fact the Private sector has certainly been pulling its weight in the recovery. The chart below shows us q/q changes in Trend data and makes clear the steady recovery in total Private sector demand since mid-2014. Until the start of this year that growth had indeed been outpaced by the Public sector, but more recently that has eased and with it the pace of recovery has stabilised at 0.4% q/q for the past 3 quarters.
Within the Private sector there has obviously been much focus on investment, and how that component has fared in the face of the mining investment slowdown. Here too we see a recovery in place. While Household Consumption growth has remained fairly steady at around +0.5% q/q, we have seen Private sector investment move back into positive territory. We have now seen the total Private sector in positive q/q territory for two consecutive quarters after a run of 9 negatives. While dwellings investment has been positive and non-dwelling building remains negative it’s not all been about houses and units. We have also seen a return to strength of machinery and equipment investment over the past 2 quarters (although there is still plenty to do to make up for declines in previous years).
In the Public sector we’ve seen previously strong Government Expenditure growth easing sharply over the past few quarters and a sharp turnaround in Public sector CAPEX. As a result the rate of growth of total Public sector demand has fallen sharply and was in negative territory (-0.3% q/q) this quarter; the first such decline since the final quarter of 2013. Our take-home message would be that the Queensland domestic economy is recovering reasonably well and that recovery is built to a good degree on the back of the Private, rather than Public, sector. Indeed, at least in this most recent quarter, the Public sector has stopped growth being even stronger.