Business Investment declines stalling QLD growth

We will see the latest national accounts for the fourth quarter of 2019 released by the ABS on Wednesday morning, but in the meantime the Queensland Treasury released their own State Accounts data late last week for the third quarter.

While the ABS produce State Final Demand (the domestic side of the economy) on a quarterly basis, Gross State Product data only comes from them on an annual basis. We must rely on the quarterly estimates from QLD Treasury for the intermediate periods, even though they tend to be rather delayed as in this release’s case.

We have previously seen some disparity in these two measures. However, we tend to see these disparities largely revised away over time. Last quarter we noted a wide disparity between the two measures and, as we expected, the revisions by the Treasury this quarter saw Q2 GSP annual growth revised down from the previous 2.6% to just 1.7%; much more in line with the ABS original estimate of 1.4%.

This most recent data up to the third quarter of 2019 shows Gross State Expenditure (the domestic portion of the economy) +0.1% q/q for an annual growth rate of just 1.1% (ABS) or 0.8% (QLD Treasury). This represents a slowing in annual growth of 0.3-0.4%. We may well see the ABS figure for Q3 revised later this week when the Q4 national accounts are released; the Treasury numbers would suggest this revision is likely to be down rather than up.

The slowdown in growth can be attributed to a continued sharp decline in Private Investment (down 6.9% annually, and down in each of the past 6 quarters) as both dwellings and business investment fell. Compensating for at least some of this fall was Public Investment which was up 6.8% annually; however, public investment is only equal to about 30% of private.

Gross State Product (which includes the impact of international and inter-state net exports) was up, according to the QLD Treasury data, 0.5% q/q for an annual increase of 1.6% (slowing from 1.7% in the previous quarter). This is the slowest rate of growth since Q2 2015 and suggests that even the MYFER-revised Budget GSP target for 2019-20 of 2.5% will be a tough ask, particularly in light of the slow-down we know is happening has happened in Q1 2020 and is likely to continue in Q2 driven by the COVID-19 impacts.

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