In 2015, the Queensland economy proved itself resilient to the end of the mining boom, and recovered from the apparent downturn, a so-called technical recession, at the end of 2014. Even though the economy is proving resilient, growth is at a much lower rate than Queensland has experienced in the past, at 2.7 per cent through the year to June, the most recent quarter for which gross state product (GSP) data are available (see chart below).
The recovery in GSP was due largely to a surge in exports, which was to be expected given the strong resources sector investment in recent years, and a large drop in imports, partly a large reduction in capital imports now that the construction phase of the mining boom is more-or-less over (see chart below). Modest growth in household consumption expenditure also made an important contribution to the recovery. As expected at the end of the mining boom, a decline in business investment had a large contractionary impact on the economy.
The economic recovery has seen reasonable, but unexceptional employment growth in Queensland (see chart below) and a reduction in the unemployment rate from over 6.5 per cent in late 2014 to around 6 per cent currently.
While the Queensland Treasury has yet to prepare GSP figures for September quarter, relevant recent data (e.g. national accounts, labour force, and international trade data) suggest the pattern in the early half of 2015 is likely to continue. That is, the Queensland economy was likely growing through the second half of 2015, but at a moderate pace. While still suffering the impact of the resources sector downturn, the economy is being bolstered by resurgent tourism and international education sectors, benefiting from the lower Australian dollar, and the residential construction sector, as suggested by all the cranes over inner-city Brisbane building sites at the moment.
I will cover the economic outlook for 2016 and beyond in a future post, but I will quickly note I remain concerned about the outlook for both business and government capital expenditure. As I have noted before, the previous Queensland Government under-provisioned for infrastructure investment in the budget forward estimates because it was counting on asset lease proceeds to fund $8 billion plus of additional new infrastructure. The current Queensland Government cannot access this funding, due to its opposition to privatisation, meaning Queensland faces a concerning decline in State government capital expenditure over the forward estimates (see chart below based on data from Table 21 in the Mid Year Fiscal and Economic Review 2015-16). This should be of significant concern to construction and engineering companies which are heavily reliant on a flow of government-funded projects.