Growth forecasts cut
Drought, fire, flood, hail and the impact of the coronavirus have combined to create one of the most-damaging summers the economies of Australia and its trading partners has seen for some time.
As a result, ANZ Research has reviewed its individual state economic forecasts, with substantial downward revisions for gross state product growth in 2019-20, especially in New South Wales, Victoria and South Australia.
The east-coast economies are likely to feel the greatest impact due to being more exposed to the hiatus in tourism and international student arrivals. Much of weather-related downturn is expected to reverse with the recovery work.
Signs were already bad in the lead up to the Australian summer. In the three months to December, the latest ANZ Stateometer shows deterioration in labour markets pulled on growth in NSW, Queensland, Western Australia and SA. Not even improved housing conditions were enough of an offset, leading growth in nearly 60 per cent of the Australian economy to slow.
All states and territories, bar the Australian Capital Territory, grew at a below trend rate.
ANZ Research expects conditions to deteriorate in the March quarter. The full economic impact of the coronavirus is less certain but some sort of recovery is likely, particularly in the latter part of 2020.
Correspondingly, changes to ANZ Research’s forecasts in 2020-21 are subtle. All states and territories are expected to have a stronger year than in 2019-20. In Western Australia a steady rate of growth is expected.
Overall, ANZ Research expects NSW’s GSP will slow to 1.25 per cent in 2019-20 before rising to 2.5 per cent in 2020-21. That follows 1.9 per cent growth in 2018-19.
In Victoria, GSP growth is expected to fall from 3.0 per cent in 2018-19 to just 1.75 per cent in 2019-20 and 2.25 per cent in 2020-21.
SA’s GSP is forecast to grow at a rate of 1.0 per cent in 2019-20, down from 1.4 per cent in 2018-19, before recovering to 2.0 per cent in 2020-21.
The ANZ Stateometer is a set of composite indices which measure economic performance across Australia’s states and territories.
The index for each jurisdiction extracts the common trend across 37 economic indicators using principal components analysis. The economic indicators are all monthly data series and cover business and household activity, the labour market, the housing market and trade.
Developments across this diverse country are rarely uniform and we hope these geographically specific indices help you to see through the haze of state by state data and more intuitively piece together the state of the national economy.
Victoria's growth rate remained below average, although improving momentum meant it lifted from the September quarter. Housing was a little less of a drag, as was the business component. The labour market component grew above trend.
Tasmania and Northern Territory also grew below trend but accelerated.
NSW’s economy grew at a below trend rate and decelerated, on the back of fading positive impact of the labour market. The consumer component remained below trend. The drag from the housing component lessened relative to the September quarter.
Queensland, Western Australia and South Australia all grew below trend and decelerated.
Cherelle Murphy is a Senior Economist at ANZ
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