It was unsurprising that the National Accounts data released by the ABS today showed the Australian economy continuing to grow at a sub-trend rate (2.5% through-the-year), and that Queensland was enduring a large shock from a decline in resources sector capital spending (see Pete Faulkner’s post GDP +0.5%/+2.5% broadly in line with expectations. QLD falls again). However, it was a bit surprising that a drop in public sector capital/investment spending, particularly by the State and Local General Government sector, was also a big driver of the 1% drop in State Final Demand recorded in the December quarter (see chart below, noting the first five columns add up to the sixth, and represent percentage point contributions to the quarterly change in State Final Demand of -1%).
Much of State and Local General Government investment spending would comprise roads and other civil infrastructure built by Transport and Main Roads and local councils. Such spending has obviously been in decline, and it will be interesting to see what happens in future quarters, given there will now be no boost from funds that would have come from leasing out assets.
Finally, Queensland Treasury has produced an excellent information brief on the latest State Final Demand data, setting out contributions to the decline in State Final Demand in more detail than I have done. The brief also makes it clear that the actual performance of the Queensland economy over December quarter 2014 may not have been as bad as the State Final Demand numbers suggest, because they don’t account for exports (or imports), and there is data to suggest Queensland’s export performance over 2014 improved markedly. This would be as expected, as past resources sector investments will have translated into increased production and exports. That said, in my view, it seems reasonable to conclude that December quarter was still a poor one for the Queensland economy, particularly when one considers recent increases in unemployment.