NSW winning fiscal State of Origin

My former Treasury colleague and old friend Joe Branigan, now at Cadence Economics and SMART Infrastructure Facility, was quick to tweet a State-of-Origin themed chart yesterday following the release of the NSW State Budget (see Joe’s chart below).

Fiscal_State_of_Origin

As noted in the budget papers, NSW is running “healthy surpluses” on its operating account, with a net operating balance forecast at an average of $2 billion over the budget forward estimates. Due to its privatisation program and healthy stamp duty receipts from a booming property market (which the NSW Treasury now expects to cool), NSW has been able to fund a massive infrastructure program, with (net) infrastructure investment per capita nearly three times higher in NSW than in Queensland, according to Joe’s calculations. NSW has been able to do this while keeping per capita debt figures under control and well below Queensland’s. (Note that, as a result of its large infrastructure program, NSW’s recorded fiscal deficits will be larger than Queensland’s over the forward estimates.)

In Queensland, with a State Government that is ideologically opposed to privatisation, and an Opposition that has given in to the public aversion to asset sales and has now ruled them out, there is little prospect of Queensland matching NSW’s record on infrastructure any time soon.

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Open data workshop at the Queensland Startup Precinct in TC Beirne Building

In the 2017-18 Queensland Budget handed down last Tuesday, among a large number of measures is the “Open data policy and action plan”, to which the Government is allocating just over $1 million over two financial years (see Budget Paper 4 Budget Measures on p. 18). Arguably this is money well spent, as there are huge opportunities for businesses and community groups to make use of the vast amount of data that is hidden away in government agencies.

Significant progress has already been made on open data in Queensland, including by the current and previous State governments, and you may be aware that various data sets are already available on data.qld.gov.au, and that one practical application of open data has been the Brisbane Bus and Train app. But there is widespread recognition that more needs to be done, and hence the Open Data Institute, a non-profit company, held a workshop on Data to drive innovation and advance business on Friday 16 June at the Precinct in the TC Beirne Building in Fortitude Valley, Brisbane. The workshop took place in the Precinct’s so-called Stair Stadium, where you can sit on the steps of over-sized wooden stairs, similar to those in the State Library.

ODI_workshopData custodians and workshop facilitators debriefing and developing actions plans after the 16 June morning workshop with industry representatives (Image from the Office of the Queensland Chief Entrepreneur’s tweet).

The workshop was facilitated by local PR business Articulous Communications and brought together data custodians from various Queensland Government agencies and local councils and industry representatives from a range of sectors. Well supplied with the customary sharpies, sticky notes and pieces of butchers paper, we came up with lists of opportunities for greater use of government data by businesses throughout the whole economy and within specific sectors such as agriculture, construction and tourism. There were many interesting and practical suggestions made, including the suggestion by a plumber in the Wide-Bay-Burnett region that his local council create an online portal, so he can automatically access maps showing the locations of water and sewerage pipes on properties where he has upcoming jobs.

I grabbed the microphone a few times during the workshop and made the following points:

  • The more frequent publication of Queensland Government royalties and taxation data (e.g. monthly or quarterly) by the Queensland Treasury would provide opportunities for us to better “nowcast” the economy;
  • It would be desirable to drill down further than is currently allowed (by Budget papers and annual reports) into the Government’s expenses to discover exactly what it is spending on particular programs, including by expense item (e.g. travel and accommodation, consultancies, etc) and by region, for example;
  • A common view among participants was that it is unclear exactly what data the Government holds, and hence we need to improve our meta-data (i.e. information about data) and to make that meta-data widely accessible; and
  • Follow through on the opportunities and actions identified at the workshop is absolutely critical as, sadly, all too often these community or industry engagement forums end up going nowhere (e.g. the Rudd Government’s 2020 Summit).

In case you are wondering, the Queensland Startup Precinct is a flexible contemporary space designed for start-up businesses. It is designed to foster collaboration among startups, and hence has lots of common areas and a large kitchen with an industrial-scale Nespresso machine. The Precinct also houses the office of the Queensland Chief Entrepreneur, the highly successful Mark Sowerby, the founder of Blue Sky Alternative Investments. The Precinct was established by the Queensland Government last year and you can read more about it at:

Queensland Startup Precinct

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Qld labour market continues to improve, but part-time jobs account for bulk of employment growth

Based on the latest labour force figures released by the ABS yesterday, the Queensland labour market appears to be improving nicely, which must be very pleasing to the State Government in the lead up to the next election. While the unemployment rate (at 6.1 percent seasonally adjusted) remains higher than the national rate (5.5 percent seasonally adjusted), it is trending down (see chart below). This is despite a downswing in the construction sector. Luckily other sectors are growing, and I suspect tourism is a major contributor to jobs growth, particularly given much of the recent jobs growth has been part-time, as noted by John McCarthy in the Courier-Mail this morning. (Also see Pete Faulkner’s post Strong jobs numbers but full-time in QLD are at a standstill).

urate_May17

The major contribution of part-time jobs to recent employment growth can be clearly seen in my charts below tracking jobs growth since the last election. Here is the chart for total employment, showing an increase in total employment of around 69,200 since the last election:

Total_jobs_since_election_May17

But the increase in full-time employment since the last election has been nowhere near as large, with an increase of just 6,200:

FT_jobs_since_election_May17

Most of the additional jobs since the last election have been part-time, with an additional 63,000 part-time employed persons:

PT_jobs_since_election_May17

Finally, I should note the Economic Society of Australia (Qld) of which I’m the Secretary has a lunchtime event next Wednesday featuring Queensland Treasury’s chief economic forecaster Greg Uptin on the State’s economic outlook:

Post-Budget briefing on economic forecasts by Queensland Treasury

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Huge regional disparities in Qld Government capital spending per capita

The Queensland Government’s $10.2 billion capital program in 2017-18 is heavily skewed to regional areas outside SEQ and towards inner city Brisbane, but away from other areas in SEQ (see the chart below which I’ve created based on data in Tables 3 and 4 of Budget Paper 3 and extrapolations of ABS population data).

Regional_capital_spend

It would be good for future Budget papers to include analysis of regional per capita capital spending, explaining the reasons for any disparities. For example, the Government may be funding infrastructure to complement economic development in under-populated areas such as the Queensland outback and Darling Downs-Maranoa. But the large per capita funding differences between well-funded regions, such as Fitzroy and Inner Brisbane, and relatively poorly funded regions, such as Brisbane’s eastern, southern and western suburbs and Logan-Beaudesert among others, appear excessive to me.

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Qld Government gets lucky in election Budget, but debt to climb to $81 billion in 2020-21

The 2017-18 State Budget reveals the Queensland Government got very lucky this year, benefiting from a surge in royalties that has allowed it to generate a positive fiscal balance (i.e. the budget balance that also accounts for infrastructure spending) in 2016-17, and to record a genuine fall in total debt next financial year. The extraordinary budget outcome in 2016-17 was associated with huge estimated growth in nominal Gross State Product (GSP) of 11.75%, driven by higher coal prices.

Budget_1718_Chart1

This extreme good luck is not expected to continue obviously, and the budget records fiscal deficits for the years after 2016-17. So Queensland Government debt will continue to increase, and by the end of 2020-21 debt will exceed $41 billion for the general government sector (i.e. the public service departments) and $81 billion in total, taking into account government-owned businesses such as Energy Queensland, Queensland Rail and Seqwater as well (see chart below). In the Budget, these are called public non-financial corporations.

Budget_1718_Chart2

The total debt-to-revenue ratio, which ratings agencies such as S&P and Moody’s are concerned about, will end up at 138 percent in 2020-21 compared with 143 percent in 2015-16. But this ratio needs to fall much further, to around say 110 percent, if Queensland is to regain a AAA credit rating. The Government has delivered a politically clever election budget, but is doing little to repair Queensland’s poor fiscal position.

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Qld economy needs pick up in private sector investment

According to the latest National Accounts released by the ABS last week, private sector investment spending fell in Queensland over the March quarter (in seasonally adjusted terms) and State Final Demand would have fallen as well, if it were not for growth in public sector expenditure (see chart below).

Decomposition_Mar17

Traditionally, economic growth is associated with growing private sector investment, and the absence of a pick up in private sector investment, after it plummeted at the end of the mining investment boom, has meant Queensland’s economy has been performing below-average (see previous post). While non-dwelling construction increased in March quarter by 2.1 percent, this was more than offset by a large fall in dwelling construction of 9.4 percent. Also, business investment on machinery and equipment was 6.1 percent lower than in the previous quarter (see chart below).

Investment_Mar17

As I have noted before (see Nervous times for construction industry as downswing underway), dwelling construction is in a downswing at the moment, but the large fall in March quarter would partly be attributable to the wet weather and Cyclone Debbie at the end of March quarter.

Regarding non-dwelling construction, further growth should occur as the Queen’s Wharf project ramps up and as other projects including possibly the Adani Carmichael mine and rail line commence. But more broadly-based private sector investment is required to really push the Queensland economy along.

For Queensland Treasury’s view on the outlook for the Queensland economy, please consider attending an upcoming Economic Society of Australia (Qld) seminar:

Upcoming Qld Treasury post-Budget briefing on outlook for Qld economy

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Qld economy surviving, but not thriving

In his latest column, Stormy times for an economy in the doldrums, Ross Gittins refers to Queensland’s “below-par” growth in State Final Demand, one of the statistics released by the ABS last Wednesday as part of the March quarter National Accounts. Certainly, the domestic drivers of growth in Queensland, such as consumption and investment expenditures, which are measured in State Final Demand, are growing well below average. My old friend and former Treasury colleague Joe Branigan, now Senior Associate at Cadence Economics, alerted me to this the other day, and provided the handy chart below, which shows just how below-par State Final Demand growth has been in Queensland.

SFD_chart_Mar17_JB

Joe observed:

  • State Final Demand growth is well below the long-run average (1.77% v 4.04%)
  • The only sectors that are materially beating the long-run average are:
    • Electricity, gas and other fuel; i.e. power bills (Year to March 2017 growth = 6.5%, long-run average = 3.2%)
    • Commonwealth public corporations; presumably the NBN (Year to March 2017 growth = 28.5%, long-run average = 1.0%)

I should note State Final Demand is the sum of the domestic sources of demand in a State economy. It does not include exports or subtract imports, and is hence not a true measure of State economic performance. The Queensland economy has been performing better than State Final Demand data have suggested recently, due to growing exports, particularly of LNG. But, even so, it is clear from the chart in my last post that GSP growth has been running at below its long-run average, too:

Upcoming Qld Treasury post-Budget briefing on Qld’s economic outlook

Queensland’s stellar export performance has helped our economy immensely, but given weaknesses in domestic drivers, arguably the economy has merely survived, rather than thrived.

Also see Pete Faulkner’s commentary on the latest National Accounts:

GDP slows (as expected) while QLD grinds to a halt

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