STATE details from today’s (March 1) December quarter national accounts show that the Tasmanian economy is still growing faster than the national average, despite Tasmania’s property boom having clearly come to an end and despite the fact that Tasmania is deriving little benefit from the China-induced resources boom that is boosting the economies of Western Australia, Queensland and the Northern Territory.

• State final demand — the sum of household, business and government expenditures on goods and services, which is the broadest measure of spending at a State level contained in the quarterly national accounts — rose by 1.6% in real terms (seasonally adjusted) in Tasmania in the December quarter, after a 2.1% increase in the September quarter. This was faster than for any other State or Territory except WA (where it rose a massive 4.5% in the December quarter, and the NT, where it rose by 3.7%). For the mainland as a whole, real state final demand rose by 1.3% in the December quarter, after a 0.8% increase in the September quarter. State final demand has now risen faster in Tasmania than on the mainland in eight of the past 11 quarters.

• Over the year to the December quarter, Tasmanian state final demand rose by 5.3% in real terms, down slightly from 6.4% over the year to the September quarter and from 7.0% over the year to the December quarter 2004. Tasmania’s annual real growth rate through 2005 was exceeded by the NT (11.5%), WA (10.4%) and Queensland (6.4%) but was above the mainland average of 4.3% (which was dragged down by a very weak performance in NSW where State final demand grew just 2.0% over the year to the December quarter).

• In underlying trend terms (which smooth out the inevitable volatility in quarterly data), Tasmanian state final demand grew by 1.1% in real terms in the December quarter, the slowest rate since the March quarter of 2003, but nonetheless the eleventh consecutive quarter of positive trend growth. This is the longest run of continuous positive trend growth in at least 20 years. Over the year to the December quarter, real Tasmanian State final demand grew by 5.5%, below the three resource-rich States but above the mainland average of 4.5%.

• The strong growth in Tasmanian final demand has continued despite the fact that Tasmania’s housing boom peaked nearly two years ago. Dwelling investment rose by just 0.4% in real terms during 2005 (though this was better than NSW or Victoria which both recorded falls of more than 10% in dwelling investment last year). Growth has instead been sustained by household consumption spending, which rose 3.2% in real terms over the year to the December quarter, faster than in any other State except the three resource-boom States (WA, Qld and the NT); and by business investment which grew 16.2% over the year to the December quarter, a rate which matched Queensland’s, though fell well behind WA’s resources-driven 37% and the Northern Territory’s 41%, but exceeded the mainland average of 14.3%. The growth in Tasmanian business investment was entirely attributable to increased plant and equipment purchases (which rose 32% over the year to the December quarter); non-residential construction spending, which grew very strongly during 2004 (up 41%) appears to have plateaued during 2005. Spending by Federal, State and local governments grew by 5.6% in real terms in Tasmania over the year to the December quarter, compared to 3.8% on the mainland.

• The only disappointing aspect of today’s data for Tasmania was the poor performance of international exports (which are not included in State final demand). They dropped by 5.4% in real terms in the December quarter, after a 0.6% decline in the September quarter, to their lowest level in five quarters, and were 6.3% below the level of the December quarter 2004. Mainland international exports were down by ‘only’ 1.2% over the year to the December quarter (in real terms).

Saul Eslake
Chief Economist
ANZ

Level 10, 100 Queen Street
Melbourne. Vic. 3000.

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