Hidden in a note to its economic forecasts table in the state budget was the extraordinary estimate from Queensland Treasury that, in nominal dollar terms, the state economy expanded 22% last financial year, 2021-22 (see the chart below based on estimates prepared when updating my interstate debt comparisons slide deck). Queensland’s Gross State Product was nearly $450 billion in nominal dollar terms in 2021-22, an increase of around $80 billion, largely due to crazily high coal prices. In real or volume terms, adjusting for price increases including coal price increases which have blown out the value of exports in dollar terms, the economy only expanded 3% according to Queensland Treasury’s estimates.
I’ve previously covered on QEW the discrepancy between value and volume measures of exports that is behind the big divergence between nominal and real GSP growth estimates (see Qld & Australia exporting lower volumes but earning more, due to higher coal and iron ore prices).
A lot of the additional GSP will have gone to mining companies as profits, to be shared among both domestic and foreign shareholders. That said, in 2021-22, the state government received $9 billion in royalty revenue compared with the original forecast of $3 billion, and mining workers would have benefited, too, with reports of higher wages and sign-on bonuses (see the QEW article linked to previously).
The huge positive boost to Queensland’s economy that we saw in 2021-22 is consistent with Morgans Chief Economist Michael Knox’s view covered by John McCarthy in his recent InQld article Better than the gold rush: How Australia is booming while share prices plunge. Of course, we now need to see how the economy reacts to the RBA hiking interest rates, and we’re expecting a half-percentage-point (0.5%) increase in the overnight cash rate today. As I’ve covered in a previous post, consumer confidence has fallen in recent weeks, probably due to recent interest rate hikes (see Consumer confidence indicators are very concerning).
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