QLD Q4 Gross State Product shows growth slowing sharply…yet no one seemed to notice

While we were away the release by Queensland Treasury of the State Accounts for the fourth quarter of 2018 appeared, with apparently little fanfare or coverage (we can find no mention from any news source or from Queensland Treasury). While the ABS produce Gross State Product (GSP) data only on an annual basis at the June quarter, the QLD Treasury produce quarterly Trend estimates (albeit rather delayed). We have previously seen some disparity in these two measures, although past experience would suggest that these differences often get revised away on subsequent releases; the chart below makes the point clear.

The Treasury data shows Gross State Product lifted 0.5% q/q in the fourth quarter for a year-on-year increase of 2.6%; this is a sharp slowdown from the previous two quarters when we saw grwoth at 4.1% (Q2) and 3.4% (Q3).

Gross State Expenditure-GSE-(which ignores the external account) was unchanged for Q4 on a quarterly basis for a 1.3% y/y increase (ABS estimates of State Final Demand were +0.3% q/q and +1.8% y/y). The big drag on growth was a slowing of household consumption (up just 1.9% y/y) and a continuing decline in Private Investment (-3.3% y/y). Offsetting some of this weakness was Public Investment which increased 9.6% y/y; however, Public Investment is only 1/4 of the size of Private Investment.

Once we add the external account we see net exports added to Gross State Product growth to bring the rate to 2.6% y/y (although this is well down on the 3.4% rate in Q3).

Contributions from the various components to the year-on-year growth in GSP were;

  • Household Consumption +0.9 ppts; (smallest contribution in 4 years)
  • Govt Consumption +0.6 ppts;
  • Private Investment -0.7 ppts;
  • Public Investment +0.5 ppts; (greatest contribution since Sept 2010)
  • Net Intl Exports +0.8 ppts
  • Balancing Item (incl interstate trade) +0.3 ppts

We noted last quarter that Household Consumption accounts for almost 60% of GSP. It was clear that, as is the case at the national level, weak wages growth, added to Queensland’s relatively weaker labour market, would make sustained household consumption growth a tricky proposition; and that is what we have seen in this data. National Accounts for Q1 2019 will be released later this week and at this stage the prospect is for GDP growth as slow as 1.5% y/y; such a result is unlikely to see QLD performing much better.

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