The latest annual gross state product figures shows that overall Victoria and New South Wales were the two strongest performing economies in 2016-17, while conversely Western Australia’s economy went backward by more than any state since the 1990s recession. But while the figures show the non-mining states are again leading the way, they also confirm that household incomes across the nation fell in real terms.
While we get the national GDP figures every three months (the next are due in two weeks) we only get the state version once a year – known as the gross state product figures. The biggest difference between GSP and the state final demand figures that are in the quarterly GDP figures is that they include trade.
This is important especially in a state like Western Australia where state final demand has been going backwards since 203-14, but because of exports the state’s economy has been growing.
Well, no more.
In 2016-17 the WA economy shrank 2.7% – the biggest fall of a state’s economy since NSW’s economy fell 2.8% in the midst of the 1990s recession in 1990-91.
Even worse, its GSP per capita fell 3.3%.
By contrast over on the eastern seaboard Victoria’s economy grew by 3.3% and NSW rose 2.9% (both behind the much smaller and thus more erratic Northern Territory and ACT).
In per capita terms South Australia was the standout state. It’s economy grew 1.6% in per capita terms, just ahead of NSW’s 1.3%.
That Victoria’s GSP per capita grew by so much less than its total figure highlights the massive increase in its population that has driven a lot of its economic performance – including having the strongest growth of employment of any state on the mainland.
That Western Australia saw the strongest growth of full-time employment does seem a bit odd given it is in a recession, but it is more a factor of timing than good economic news.
Since the end of 2014, the number of people employed full-time in WA has plunged, but there was a bit of a natural recovery in 2016-17. However, there are still 26,000 fewer people now employed full-time in WA than there were in December 2014:
The figures show just how massive has been the change after the mining boom.
In 2012-13, combined business investment in WA and Queensland was 61% higher than in NSW and Victoria; in the past year it was 21% lower:
And while Western Australia’s economy had been able to keep above water due to exports, in 2016-17 the contribution of $9.2bn worth of net exports in real terms was not able to counter the $15.2bn fall in private capital expenditure:
It all added up to WA having the worst performing economy in the year. And it meant that for the first time the combined economies of the two mining states of WA and Queensland did not contribute to Australia’s GDP growth, while NSW and Victoria took the reins:
The growth in NSW and Victoria was mostly driven by household expenditure as well as public spending. South Australia similarly saw a big boost in public spending, but this was mostly due to the purchase of the new Royal Adelaide hospital.
The ACT was actually the strongest housing market, with new dwelling construction contributing 1% points worth of growth – double the next biggest in NSW:
It means the NSW’s economy now takes up a bigger share of the national economy than it has for over a decade, and WA’s economy takes up a smaller share than it has since 2008-09:
But one thing all the states have in common is falling real household disposable incomes.
Reflecting the national picture observed in the latest GDP figures, real household disposable income fell in every state and territory in 2016-17 except for the ACT – which saw a big boost coming from property income.
Western Australia still remains the richest state per capita, but its household disposable income per capita fell 2.8% in current dollars and whopping 3.5% in real terms. So big was the fall that it was the only state to actually see a fall by more than the national average:
The state economy figures are good for giving the full picture of what is going on across the country. It shows that while NSW and Victoria are leading the way and driving national growth, Western Australia has fallen into a very deep recession, with the fall in business investment so large that not even its massive surge in exports is enough to overcome it.
But while economic growth varies across the country, one thing households in all states are experiencing is declining incomes. As we move into the new year, with employment growing well but wages growth largely dormant, it will remain be the biggest economic puzzle – how to get income growth re-started.
And as we get closer to the next election, it is a puzzle that the government hopes – and possibly needs – to solve.