The true state of Queensland’s economy

Newman
Cross posted from The Conversation

by Fabrizio Carmignani, Professor, Griffith Business School at Griffith University

Judging from the first week of campaigning, the 2015 Queensland election is going to be very much about economics – and jobs in particular.

On the one hand, Premier Campbell Newman and his Liberal National Party stress that under their “strong economic management”, 1100 new jobs are being created every month and Queensland is on track to become the fastest growing state economy in Australia.

On the other hand, the Labor opposition, led by Annastacia Palaszczuk, has focused on “the savage cuts to jobs” under the Newman government, arguing those cuts have affected the delivery of adequate services, especially in health.

For voters trying to discern the facts behind each party’s spin, two crucial questions are:

  • How does Queensland’s economy compare to the rest of Australia?
  • How has the economy performed since Newman’s Liberal National government took over from Anna Bligh’s Labor back in March 2012?

The short answer to the first question is: around the average, with some local situations that tend to be among the worst in the country.

As for the second question, I was a little surprised by what the data showed: that Queensland’s economy has fared worse over the past three years than it might appear at first sight.

To offer an independent analysis of those two questions, I have used data publicly available from the Australian Bureau of Statistics. Monthly data for employment and unemployment are adjusted for seasonality using the X-12 software package of the US Census Bureau.

Now, let me add some substance to those short answers.

A snapshot of the Queensland economy today

Table 1 below reports a set of key macroeconomic indicators (looking at the economy as a whole) for each Australian state and for the aggregate Australian economy. See the notes beneath the table for technical definitions.

table1

Source: Author’s calculations based on data from the Australian Bureaus of Statistics Notes: GDP is Gross Domestic Product, GDI is Gross Domestic Income, Unemployment rate is number of unemployed persons in percent of total labour force, Youth unemployment rate is the rate of unemployment of persons ages 15-24, and the employment rate is the number of employed individuals in percent of total working age population. GDP and GDI growth rates refer to the period June 2013-June2014. The unemployment rate refers to November 2014, youth unemployment is the 12 month average to November 2014 and the employment rate is the 3 months average to November 2014. Author provided

 

In terms of Gross Domestic Product (GDP) growth in aggregate and per capita (meaning per person), the Queensland economy is broadly in line with the Australian average. Only Western Australia and Northern Territory appear to clearly outperform the Sunshine State.

But data on Gross Domestic Income (GDI) show that Queensland is well below the Australian average. In particular, GDI per-capita in Queensland has decreased by 1% between June 2013 and June 2014. This is the second largest decline in the entire country.

Conceptually, GDP and GDI measure the same thing: output. However, they do that from two different perspectives. GDP measures “expenditures” while GDI measures “incomes”. The discrepancy between the two arises because of measurement errors.

GDP is the more popular of the two measures, but recently most Statistical Offices have started reporting both. In fact, it has been shown that GDI tends to suffer from a smaller measurement error than GDP.

GDI is therefore likely to be a more reliable predictor of the business cycle of the economy. And this is not good news for Queensland, because it means that we might be going through a much less favourable economic phase than we believe.

In terms of labour market performance, Queensland currently has the equal highest unemployment rate in the country (6.9%), matched only by Tasmania, even though this is only a few decimal points higher than the Australian average (6.3%).

Youth unemployment in Queensland (14.1%) is marginally below the Australian average of 14.5%. However, there is a lot of regional variation within Queensland. In Cairns, for instance, youth unemployment is above 21%, one of the highest rates observed in Australia. Conversely, in Mackay youth unemployment drops to 8.6%.

Newman vs Bligh on jobs and growth

In Table 2, I report the change in several macroeconomic variables since 2007. The period of observation is split in three sub-periods corresponding to the latest three Queensland governments: Bligh I (September 2007-March 2009), Bligh II (March 2009-March 2012), and Newman (March 2012 to the latest available information).

The table reports the data for Queensland and Australia overall. In terms of economic growth, again GDP and GDI provide quite different indications. According to GDP, the Queensland economy under the LNP government has performed on par with the Australian aggregate – slightly better, in fact.

Conversely, GDI data present quite a dim picture, with Queensland doing much worse than the Australian average and, more importantly, experiencing a net 2% decline in income per-capita. In this respect, the LNP government has delivered a significantly worse outcome than the previous two Labor governments.

Employment performance appears to be the highlight of the LNP government. The increase reported in the table corresponds to an average of about 970 new jobs per month between March 2012 and November 2014.

But, unfortunately for Queensland, this is only part of the story. First, practically all of the new jobs created are part-time. In fact, full-time employment decreased during the period of observation from 1.634 million to 1.626 million. Those are “original” figures; the seasonally adjusted figures show an even stronger decline. (You can read more about seasonal adjustment of jobs data here.)

Second, unemployment has grown. Now, the increase shown in the table refers to the seasonally adjusted data and is considerably larger than the increase resulting from the original data. Still, the creation of new jobs occurred while existing jobs were being destroyed.

As a result, the seasonally adjusted unemployment rate increased from 5.5% in March 2012 to 6.9% in November 2014. Even the original data show an increase in the unemployment rate, albeit of a much more modest magnitude.

table2
Source: Author’s calculations based on data from the Australian Bureau of Statistics Notes: Growth rates of GDP and GDP are annual averages. Growth rates of employment and unemployment are measured over the entire period of each government using seasonally adjusted monthly data. In addition to the growth, the table also reports the simple change in level (i.e. change in the number of people employed and unemployed). The change in unemployment rate is simply the difference between unemployment rate at the beginning of the period and unemployment rate at the end of the period. Author provided

Overall, under the LNP government, the Queensland labour market appears to have performed worse than the Australian average.

Also, it does not seem that the Newman government has outperformed either of the two Bligh governments. During Bligh’s time in power, from September 2007 to March 2012, the Queensland economy experienced higher GDI growth, faster employment growth, and a smaller increase in the rate of unemployment.

The Newman government did marginally better than the Labor government in terms of GDP per-capita growth and better than Bligh I in terms of limiting the growth in the number of unemployed people. However, the growth in unemployment during Bligh I occurred at a time when Australian unemployment was growing even faster.

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Comments

    • I think that Qld will continue to struggle for some time in the coal mining centres as well as the LNG projects. Lots of LPG that seems to have been forgotten about, but it’s deeper and more costly to extract.

      But never mind – come the election and the LNP will claim a victory as they will win, and Labor will also claim a victory as they will win extra seats. Really they can’t fall any lower than 7 seats, that was just embarrassing.

      It’s hard to get excited about this election.

      • “It’s hard to get excited about this election.”

        I’d tend to agree with you Peter, except for the fact that the reigning Premier might lose his seat while his government wins the election. That’s not a common occurrence.

      • I think that Qld will continue to struggle for some time in the coal mining centres as well as the LNG projects.

        on the other hand unproductive FIRB centres will do very well

      • @ Lachlan and AB

        Maybe, I thought that he had pulled back a lot of support, but you may be right. We will soon find out.

        I’ve been watching the ALP ads and I find them way too negative.

      • “Maybe, I thought that he had pulled back a lot of support, but you may be right. We will soon find out.”

        I’d put it at a 50:50 chance…which makes it even more interesting!

        I’m in Vic so thankfully our electioneering is in the past for a while.

      • “I’ve been watching the ALP ads and I find them way too negative.”

        Huh? Granted I don’t watch much TV but the only ALP ad I’ve seen is the one where Annastacia Palaszczuk says that they will boost training to help regional jobs. That doesn’t appear to be a negative ad.

      • Lachlan, the odds are $1.70 he will lose the Ashgrove seat.
        That is the easiest money you’ll earn this year. I’m going to have some at that , more than some actually.WW

    • As I said yesterday 😉

      Wow. The Queensland Government is getting real bang for its buck.

      ‘In 2012–13, mineral and energy companies contributed an estimated $37.9 billion to the Queensland economy and $69.7 billion in aggregate spending through supply chain opportunities.

      Mining in Queensland generated over $2.7 billion in royalties last year which will be used to fund essential services, including schools, hospitals and emergency services.

      In 2012–13, the resource sector also employed over 64,000 Queenslanders.’

      All that for a handful of concessions of less than $1.5b. Easy money. And a bug win for Queensland tax payers.

      • It gets even better.

        When you scour through Peel’s document, many of the ‘concessions” are nothing more than usual operating procedure and necessary infrastructure Investment. These investments in the State’s future economic growth will deliver benefits for years to come. The real direct ‘concession’ figure is monumentally less!

        A genuine value for money exercise on behalf of the Queensland taxpayer – the ultimate winners.

      • I find it interesting that Adani are advertising in tandem with the LNP both projecting a rosy future for our coal industry, which may not be exactly as it pans out.

        Definitely some collusion there.

        The LNP message is positive and the ALP very negative – I expect Qlders to buy the LNP message. People tire of negativity.

      • “A genuine value for money exercise on behalf of the Queensland taxpayer – the ultimate winners.”

        I’m sure you support the CEFC then. A profit-making agency on behalf of the Australian taxpayer – the ultimate winners.

        http://www.afr.com/p/national/clean_energy_profits_up_in_smoke_qQFE6H3pjYYoCcKnOim9cL

        Since its creation 18 months ago, the CEFC has matched private sector funds of $2.90 for each $1 of CEFC investment to catalyse over $1.55 billion in non-CEFC private capital investment in projects and programs, while it has committed $536 million. Those projects account for a reduction in 3.9 million tonnes of carbon.

        The CEFC is earning an average return of 7 per cent, and its abolition would cost taxpayers up to ­$200 million annually in lost ­revenue.

        Simply, the CEFC has reduced carbon emissions at a profit to the government.

  1. AutomatonMEMBER

    Regardless of its conclusions I have to consider the method used in this analysis to make it, at best, utterly worthless and misleading otherwise.

    That change in GDI between one state and the national average can be used as an indicator of the performance of a state government, of any persuasion, without considering the fundamental differences between the economies and macro-level influences is ridiculous.

    • +1

      Also I’d argue that it’s easier to achieve good GNI and employment figures when you are allowing the deficits to run and using the public service to soak up unemployed.

  2. On the one hand, Premier Campbell Newman and his Liberal National Party stress that under their “strong economic management”, 1100 new jobs are being created every month

    While work age population is increasing at 4200 a month

    so under Nowman’s “strong economic management” 3000 unemployed people are being created every month.

    good job

    • General Disarray

      A big plus to Newman’s regime is that if you do happen to be one of those 3000, and don’t have a place to stay, or anything to eat, you can always wear an “I’m with stupid” T-shirt and get yourself free meals and accommodation courtesy of the state.

      Freedom, bro.

      • XD

        If only this forum had a simple like button so we could subtly give kudos to the wit it possesses.

  3. I wish Anna Bligh would come back. Maybe with Peter Beattie as deputy. They could re-employ 14,000 highly paid “work for the dole ” people, otherwise known as the public service, and speed up the rate of electricity price increases, God, I miss them.

    • Don’t worry, once the electricity assets are sold off the price rises should get going.

      Can’t help you with Anna Bligh though. Not that I’d want to.

  4. In substance there is again very little difference between the major brands, other than marketing.

    The power exerted by the lobbyist machine all but guarantees that there will be no meaningful economic reform that addresses the rentier control of the economy, or the centralisation of wealth in the capital. If we want a diverse productive modern industrial economy then thinking red or blue is meaningless.

  5. Are you using GDI, or GDP(I)? If you are using GDI, than there is a conceptual difference between this and GDP. GDI deflates imports and exports using the same price index. Therefore, the difference between real GDP and real GDI growth reflects the impact of terms-of- trade changes. And the worsening performance of the state could simply reflect the marked decline in the terms of trade.