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Queensland Economic Advocacy Solutions

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Queensland's domestic economy has a spring in her step

Latest data from the Australian Bureau of Statistics reveals Queensland’s domestic economy now has a spring in her step.

State final demand (SFD) which is the measure of how the domestic economy is performing grew by 1.1 per cent in the June quarter 2017 and by 2.8 per cent across the 12 months to the quarter.  In trend terms SFD grew by 0.7 per cent in the quarter and 1.7 per cent in the year to the June quarter.

This growth was largely driven by household expenditure and private investment.   No doubt the rebuild from Severe Tropical Cyclone Debbie was in part a reason for the good growth.  However it would be wrong to simply dismiss this growth as being entirely attributed to the recovery from the natural disaster in March this year.

There is widespread and diversified economic growth now occurring across the State’s domestic economy. Indeed Queensland is matching it with other States with our quarterly growth in seasonally adjusted terms of 1.1 per cent comparing to 1.2 per cent for NSW, 1.3 per cent for Victoria and the national rate of 1.0 per cent.

Coming off the Mining investment boom was always going to be a difficult transition for Queensland but this pain is now largely behind us and investment is occurring in industry sectors outside of mining.  Indeed major projects such as the Carmichael Coal Mine will now see investment even in the Mining sector start to lift again.  When coupled with major symbolic projects like Queens Wharf the immediate outlook is looking fairly promising.  The prevailing feedback at present are businesses were wanting to see some permanency in economic improvement before reinvesting in their operations and this is now occurring.

Household expenditure is also kicking in which is good news.  Employment growth typically lags economic growth by sixth months and we are now seeing a consistent lift in employment growth (albeit mostly part-time for now).  This is opening the purse strings of many households in the Sunshine State.  Hopefully as further jobs are created underpinned by a rebounding domestic economy we will start to see wages growth lift.  However this is probably more theory than reality and we will need to see sustained economic growth to address underemployment and the associated inertia of poor wages growth.

The only cautionary note is as a State we are relying more and more on consumption expenditure from both households and government to drive the economy forward rather than investment.   Generally speaking investment is spend that sets us up for tomorrow whilst consumption spend gets us through today.  It will be a while before private sector investment rebounds enough to address the current misalignment. Government investment unfortunately continues to be the one miss from today’s State accounts. 

In summary save the high fives for now as the level of underemployment and low wages growth are undoubtedly the biggest economic challenges at present.  Not everyone is yet feeling the lift in activity but today's state accounts is a positive milestone.

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