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Last Friday saw the release of the ABS Gross State Product (GSP) data for the 2014-15 financial year. Although the ABS only produce their data for the states on an annual basis, the Queensland Treasury produces their own measure (on both a seasonally adjusted and trend basis) on a quarterly schedule. In the past there has been some discussion about which set of data we should take as “the truth” and the answer to that question has often tended to depend on the political expediency at the time (see our commentary from when Curtis Pitt used the Treasury data to suggest the LNP had pushed QLD into a technical recession at the end of last year).
In May, at the time of the those technical recession discussions, CCIQ dismissed “talking the economy down” by the Treasurer and suggested that we should wait for the definitive ABS annual data; well now we have that data and it doesn’t tell a happy story. CCIQ have “breathed a sigh of relief” that the data shows marginal growth but admit that “the Queensland economy remains weak” (you can see CCIQ’s full response to the data here).
On Friday the ABS data showed the QLD economy having grown by just 0.5% over the 2014-15 year, after growth of 2.8% in the previous year. This was jumped on by the LNP opposition as demonstrating that the Labor government were killing growth, while Curtis Pitt countered that the data actually related to 8 months of LNP control and just 4 months under Labor. Pitt also highlighted the fact that the Treasury GSP numbers showed growth of 1.3% q/q for the second quarter of the year (and +0.9% in Q1 under the LNP after a series of poor results in Q2, Q3 and Q4 last year). Both of these points were valid.
We have now had time to take a closer look at the data to try and make some sense of the various measures and statistics being bandied around by the pollies.
The first chart shows the annual GSP growth as per the ABS chain volume data and the annualised quarterly GSP data from the Queensland Treasury. What we see is a general similarity in the pattern (as you would expect) with some notable variations. One such variation relates to the 2014-15 year where the ABS has growth of just 0.5% while the Treasury data would suggest annualised growth of 1.5% (and therefore quite a different story depending on which side of the political fence you sit!). Despite the claims and counter-claims about the Treasury data back in May, it is now clear that the ABS data is significantly weaker still.
What is also clear is that, after revisions, even the Treasury data does now NOT indicate a technical recession in the latter part of 2014. Only one quarter (Q3) showed negative.
{The variations, in part at least, are caused by the fact that the Treasury adjust State Gross Expenditure by net exports both internationally and inter-state while the ABS adjust State Final Demand by international net exports}
What both data sets confirm is that growth has slowed sharply from medium-term averages, and from the recent highs of 2012. The reason for this becomes apparent when we consider the second chart below. The sharp decline in private sector CAPEX (in particular relating to the slowdown in mining investment) has not been sufficiently offset by growth elsewhere. Although dwellings investment has increased, the increase has made only a small dent in the spectacular falls in mining CAPEX.
If we look at the sum total of GSP and its components (see graph below) it is very clear that Household Consumption remains the overriding element (around 56% of GSP) for growth; and this has been witnessing reasonable growth (+2.3% according to the annualised Treasury data and +2.4% according to the ABS data). The other sector that has been strong is Net Exports, and in particular international (as opposed to inter-state) net exports (the Treasury data suggest an annualised increase of 83.6%). Here we see the impact of the states’s LNG exports (among others) starting to come online as the investment phase gives way to the production phase; a decline in imports (presumably due to a large chunk of imports having been related to mining investment) has also played its part in this shift over the past 18 months.
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November 25th, 2015 at 9:59 am
Pete, that private business investment chart is a real eye opener and looks headed back below 09/10 levels, coupled with a state govt carrying a large debt and little chance of balancing the plunge things don’t look to good in Qld. With graphs like that the fact of whether we were in a recession or not seem fairly irrelevant.
November 25th, 2015 at 10:16 am
Glen, while the private investment story certainly looks weak we need to bear in mind that it is coming off from what were incredibly high levels. Also don’t forget (as per the final chart) that private investment is only one of the components of the state’s growth and that others (notably net exports and to a lesser extent building construction) are taking up some of the slack created by the mining CAPEX slowdown. As you say, whether we were or were not in a technical recession at the end of last year is a rather moot point. What is undeniably clear is that growth has slowed sharply and that with CAPEX still so weak it will be a huge struggle to get back to anywhere close to longer term levels any time soon.
Thanks for your comments.
November 25th, 2015 at 7:05 pm
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