Who is winning the economic game?
While Queensland has dominated NSW in the State of Origin series over the last decade, a new analysis of both states’ economies has revealed that during this period NSW pulled ahead of Queensland across a number of key indicators.
The analysis, commissioned by the Property Council of Australia, illustrates that the fundamental attributes of each state’s economy have changed over time, with NSW now dominant in areas of traditional strength for Queensland.
“NSW are winning the economic game, and the Queensland Government has a big challenge ahead of it to close the gap and re-establish Queensland as the state of choice to invest,” Property Council Queensland Executive Director, Chris Mountford, said.
“The key point of difference between the states recently has been infrastructure investment, with the NSW economy riding high from record investment programs and Queensland slipping behind with a sizable infrastructure deficit.”
Traditionally, annual population growth in Queensland has outpaced that of New South Wales and provided a distinct economic advantage through stronger demand growth for goods and services. Since the slowdown in mining activity, Queensland’s population growth has eased from 2.5% per annum to below 1.5%, below that of NSW – where growth has remained comparatively steady.
“Since the mining boom we’ve seen Queensland’s migration levels, a key ingredient of our prosperity, drop as a proportion of population growth – at a time when NSW is reaching its highest migration levels since 1982,” Mr Mountford said.
“It’s clear that increased activity in NSW is drawing people, investment and jobs south of the border.”
The unemployment rates of each state had tracked along the same level between the start of the Global Financial Crisis and 2014, when the unemployment rate in NSW began to fall from 6% to 5%, while Queensland has remained stuck above 6%.
Queensland’s economic growth has tended to be stronger than NSW since the early 1990s. On average, since 1990, Queensland has expanded at a pace 1.5% points faster than New South Wales. However, in the last two years, economic growth in New South Wales has accelerated, outperforming Queensland.
“Whether you look at Gross State Product, State Final Demand, or any other key indicator, what is clear is that NSW and Queensland are continuing to diverge in terms of economic performance,”
“The underlying strength of the NSW economy is also matched by a far healthier State Government fiscal positon, which can be used to stimulate even further economic activity.”
Since 2007-08, the NSW Government has achieved a healthier cashflow than Queensland every financial year. While NSW is delivering growing surpluses, Queensland has the highest levels of debt – as a share of government revenue – of any jurisdiction.
“Queensland has a much high level of government revenue as a percentage of Gross State Product, and much greater royalties revenue than NSW, but despite these strengths we are staring down the barrel of an $80 billion state debt,”
“There’s no doubt that fiscal constraints are hurting the Government’s capacity to fund infrastructure projects and improve Queensland’s economic performance.”
Gross Fixed Capital Formation is a key measure of the value of government infrastructure investment. Over the past 10 years, State and Local Government Gross Fixed Capital formation has been significantly higher in Queensland than in New South Wales on a per capita basis. But the margin between the two States has narrowed considerably, with Queensland’s rate falling from $4,0 in 2010 to under $2,0 in 2016. It is expected that New South Wales will overtake Queensland in 2016-17.
“Under the current policy settings, the gap between the states only stands to widen over the long term,” Mr Mountford said.
“It is clear that NSW infrastructure investment policies are already triggering increased economic activity, with far more to come.”
“With the State Budget less than a month away, the Queensland Government must keep investing in infrastructure like roads, hospitals and schools if we are going to bridge this gap and draw more jobs, investment and economic uplift north.”