The 2012-13 State Accounts, released by the ABS on Thursday, confirm that heavy engineering construction, largely by the resources sector, shored up the Queensland economy in 2012-13 and protected it from the adverse impacts of Government spending cuts. This is apparent from a decomposition of the sources of Queensland’s 3.6% Gross State Product (GSP) growth in 2012-13:
I expect the State Government will start adding to GSP growth over 2014, particularly if the anticipated early election in March or April goes ahead. The State and Local Government sector has certainly cut its spending significantly in recent times, partly as a result of lower capital spending by public corporations such as Seqwater and Energex (see chart below). While State Government spending cuts have been necessary for improving the State’s finances, it’s reasonably clear they have impacted on growth in the short-term.
I have no idea why the statistical adjustment the ABS makes to the GSP numbers has had such a large impact on the GSP growth rate. It may be that Queensland is exporting more to other States, but we’ll need to wait until Queensland Treasury produces its own detailed State Accounts estimates sometime in the future to have a better idea what happened in 2012-13.
There are positive signs for improvement in the Queensland economy over 2014, as I’ve discussed in a recent post (Reasons to be optimistic). New ABS data on concrete production released on Friday and reported by Pete Faulkner (Concrete production points to QLD construction recovery) supports an optimistic outlook.