This edition of Data Wrap considers recent South Australian developments in respect of business investment, construction activity, overseas services exports and the wellbeing of the population. A more detailed analysis of these topics will be provided in the Centre’s upcoming June Economic Briefing Report.
Private sector new capital expenditure softens
ABS data on private new capital expenditure, released yesterday, provides insight into recent developments in business investment. They only provide “insight” since they exclude certain industries and forms of investment activity (notably second hand asset sales and transactions between the private and public sectors).
The latest estimates suggest that business investment in South Australia softened in the early months of the year. Total private sector new capital expenditure fell by 3.8 per cent in the March quarter 2018, in real trend terms. This decline follows a strong recovery in new capital spending through 2017. The net effects of these changes is that business investment currently remains around its post global financial crisis average level.
Construction activity remains strong
ABS preliminary estimates of construction activity reveal that conditions in the South Australian construction sector remained quite healthy in the first three months of the year. The total volume of work done rose by 2.0 per cent in the March quarter 2018 (in trend terms), to be up 14 per cent compared to the March quarter 2017. Nationally, construction activity rose by 1.4 per cent in the March quarter and was up 6.1 per cent through the year.
The strong rise in construction activity for South Australia over the past year was broadly based, reflecting large increases in both engineering and building construction (up 14 per cent respectively). Engineering construction in both South Australia and nationally has been underpinned by state and federal government investment in public transport infrastructure projects.
But building activity might stabilise in the short term
While building activity has grown over the past year, forward indicators suggest that some stabilisation or even moderation may be in store. Data released by the ABS on Wednesday showed that the total value of building jobs approved in April 2018 for South Australia was down 2.0 per cent compared to the same time last year. This decline was mainly due to a fall in the value of non-residential building approvals (down 3.8 per cent), while residential building approvals were also softer (down 0.8 per cent).
On a more positive note, non-residential building activity should remain solid in the short term as a large spike in non-residential approvals during last spring suggests there remains a significant volume of work to be completed. There are also some positive signs for residential building as the number of dwelling units approved in April 2018 was up 4.5 per cent compared to a year earlier, and has risen for four months now.
International services exports continue to grow, but at a slower pace
The latest picture of the state’s overseas services export performance reveals that services exports continued to expand in 2017, but at a much slower pace than in previous years. The nominal value of South Australia’s international services exports rose by 2.6 per cent to $3.3 billion in the 2017 calendar year. This latest result compares with annual increases of more than 10 per cent over the previous two years. It was also modest in the context of national performance, with national services exports growing by 8.8 per cent in 2017.
South Australians’ sense of wellbeing improves amidst a national decline
The various economic indicators we track provide insight into how living standards are evolving in South Australia. However, they do not provide a comprehensive account of how quality of life is developing. In particular, they provide no insight into important psychological aspects of human wellbeing, such as happiness and life satisfaction. Other indicators, such as the NAB Australian Wellbeing Index, seek to redress this deficit by asking survey respondents’ how they feel about different aspects of their own life satisfaction.
The latest NAB survey results reveal that the overall wellbeing of Australians fell to a series low in the first quarter of 2018 (down 1.8 points to 62.8). In comparison, South Australia and the Northern Territory was the only region to record a rise in wellbeing for the quarter (up 0.8 points to 64.7), leaving it with the highest level of wellbeing of any state or territory. While a positive result for the state, it should be observed that reported wellbeing can fluctuate significantly from quarter to quarter. Nonetheless, it is a timely reminder that economic indicators do not provide a holistic account of peoples’ living standards.