The Courier-Mail today is reporting a “huge slump” in the Queensland economy after yesterday’s ABS National Accounts figures revealed state final demand grew only 0.1 percent in the June quarter, the second lowest rate among states and territories. The paper notes:
“The slump in the data, which does not include the state’s booming export sector, was blamed on a virtual shutdown of government spending on infrastructure while the private sector has started to open its wallet.”
I’ve been concerned about Queensland’s economic performance for a long while now, but I think the commentary I’ve seen in response to the latest data is misguided and somewhat hysterical, especially since the national economy is performing reasonably well.
The disappointing state result is largely a reflection of the lumpy nature of capital investment spending, which means spending can vary substantially from quarter-to-quarter depending on whether major projects are commencing, ramping up, or finishing. As shown in the chart below, the “huge slump” is due largely to lower capital spending in June quarter than March quarter by public corporations (e.g. Energy Queensland, QR, the state-owned ports, Urban Utilities). There appears to have been a big rush of public corporations capital spending in March quarter, pumping up that quarter’s figure to $1.31 billion in total, which fell to $1.17 billion in June quarter. This was, nonetheless, slightly higher than the figure of $1.16 billion in December quarter last year.
The Courier-Mail was right to point out that “the private sector has started to open its wallet” and it is encouraging that machinery and equipment investment is starting to pick up (chart below). That said, we’re still well below the total private capital investment levels we saw earlier this decade when the massive $70 billion Gladstone LNG terminals construction project was underway. That’s the huge bulge you can see in non-dwelling construction in the chart below.
Overall, the Queensland economy remains lukewarm, but it is hysterical to say it’s had a “huge slump.”