South Australian enjoys strongest growth in eight years, but dependent on agriculture
State level estimates of gross domestic product, which the ABS calls gross state product (GSP), are produced by the ABS on an annual basis as part of its State Accounts series. GSP represents the total market value of all final goods and services that are produced in a state. As such, it provides one of the most comprehensive measures of states’ macroeconomic performance.
The latest State Accounts indicate that South Australia’s real GSP rose by 2.2 per cent in 2016/17, which is the largest rise since 2008/09. GSP growth has been quit sluggish over recent years, averaging just 0.9 per cent per annum over the previous 5 years.
South Australia marginally exceeded Australia’s Gross Domestic Product growth rate of 2.0 per cent for 2016/17. National GDP was held back by a significant decline in GSP for Western Australia (-2.7 per cent), which was largely due to a contraction in mining investment. GSP growth was also subdued for Queensland (1.8 per cent) and Tasmania (1.1 per cent). In contrast, the Australian Capital Territory (4.6 per cent), Northern Territory (4.0 per cent), Victoria (3.3 per cent) and New South Wales (2.9 per cent) all recorded strong GSP outcomes.
South Australia’s relative GSP performance for 2016/17 is impressive when one accounts for the state’s relative slower rate of population growth. GSP per capita for South Australia rose by 1.6 per cent, while national GDP per capita rose 0.4 per cent. Only the Northern Territory (3.7 per cent) and Australian Capital Territory (2.9 per cent) recorded larger increases in GSP per capita.
While the latest headline GSP results for South Australia seem quite positive, digging deeper reveals a less rosy picture. Estimates of gross value added by industry indicate that the improved GSP performance for 2016/17 was narrowly based, being driven by a large increase in gross product for the farm sector which enjoyed quite favourable seasonal conditions. The agriculture, forestry and fishing sector accounted for 1.4 percentage points of the 2.2 per cent rise in GSP for 2016/17. Hence non-farm GSP growth was 0.8 per cent, which is only a marginal improvement compared to 2015/16 (0.7 per cent), and subdued by the standard of earlier years.
A much more detailed analysis of South Australia’s recent GSP performance will be presented in SACES’s December 2017 Economic Briefing Report, which will be released on 18 December.
Construction activity continues to improve
Activity levels in the South Australian construction sector recovered strongly toward the end of 2016 and have continued to grow through 2017. Latest preliminary estimates released by the ABS last week show that the total volume of work done measured in trend terms rose by 3.7 per cent in the September quarter. In comparison, the volume of work done nationally rose by 0.6 per cent (in seasonally adjusted terms work done rose by 16 per cent, but this appears to be largely due to the importation of floating LNG platforms, which exaggerated the underlying strength in construction activity!).
Looking more closely at the South Australian results, building construction was up 2.7 per cent in the September quarter, while engineering construction was up 5.2 per cent. Seasonally adjusted data indicates that the rise in building construction was driven by residential building, whereas non-residential building fell. Meanwhile, engineering construction continues to be supported by large scale transport infrastructure projects for the public sector (e.g. North-South Corridor).