Q4 GDP surprises on the upside. QLD still relying on the public sector

The fourth quarter GDP data released this morning was stronger than expectations, which along with upward revisions to past quarters saw the year-on-year number significantly better than had been hoped for. Seasonally adjusted GDP rose 0.5% q/q for a year-on-year increase of 2.2% (up from 1.8% in the previous quarter).

 

The ABS also provide us with quarterly data for State Final Demand, which is the domestic component of the state’s economy. Data for Gross State Product (which includes the international and inter-state elements) is only available from the ABS on an annual basis; the most recent data for 2018-19 showed an annual increase of 1.4%. However, the QLD Treasury provide quarterly estimates for Gross State Product (albeit rather delayed) and a while ago we got their data for the third quarter of 2019 (see recent blog post here).

The QLD Treasury Trend data for Q3 showed State Final Demand up just 0.1% q/q; today’s ABS revised data for Q3 had growth at a much stronger 0.3% (revised up from +0.1%) which might suggest upward revisions to come from the Queensland Treasury.

Q4 data has State Final Demand up 0.3% q/q for a year-on-year increase of 1.3% (up from +1.2% in Q3) As the chart below makes clear, the domestic side of the QLD economy has experienced a marked slow-down and growth remains sluggish.

The slowing in growth in the second and third and fourth quarters of 2019 was largely due to a slowdown in private sector investment, which fell 1.5% q/q and has fallen in each of the past seven quarters.

The Public sector saw some growth with government consumption growing at 1.0% q/q and public investment up 1.7% q/q. However, although the total public sector grew at 1.0% q/q this was largely negated by the much larger private sector which fell (-0.1% q/q). Household consumption managed just a 0.3% q/q lift while private capital expenditure fell. (All QLD figures quoted are Trend)

Growth in the domestic QLD economy is coming exclusively from the public sector with the private sector having fallen for each of the past 6 quarters. The total private sector is now 0.8% below the level seen in the second quarter of 2018. The Public sector, over the same period, has increased by 8.5%.

The State cannot continue to rely exclusively on the Public sector for growth and will need to see some return to private sector growth in coming quarters if we are not to slide further.

Of course all this data relates to a period before the impacts of the summer bushfires and, more recently, the COVID-19 outbreak had been felt on economic growth. It is almost certain that coming quarters will be challenging with much talk of Australia’s long run of recession-free growth looking in danger. However, at least the base from which the economy started 2020 was somewhat stronger than previously thought.

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