NT economic growth

Approaches to calculating gross state product

Gross state product is calculated using three different methods: expenditure approach, income approach, and production approach. In the expenditure approach the key components are consumption, investment and interstate and overseas trade. In the income approach gross state product is calculated using the compensation of employees (wages and salaries), gross operating surplus (return to capital and entrepreneurship). In the production approach gross state product is calculated by using industry sector gross value added (gross value added equals output minus intermediate use of inputs). All three approaches should give the same figure for gross state product each year.

Gross state product is calculated using three different methods: expenditure approach, income approach, and production approach.

  • Expenditure: the key components are consumption, investment and interstate and overseas trade.
  • Income: gross state product is calculated using the compensation of employees (wages and salaries), gross operating surplus (return to capital and entrepreneurship).
  • Production: gross state product is calculated by using industry sector gross value added (gross value added equals output minus intermediate use of inputs).

All three approaches should give the same figure for gross state product each year.

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In 2018-19, the Northern Territory (NT) economy detracted by 1.5% to $26.1 billion, as measured by gross state product (GSP) (inflation adjusted). This was below the national rate of 1.9% and less than the 2.0% rate reported for 2017-18. The Territory was the only jurisdiction that recorded a decline in GSP while Tasmania recorded the highest growth at 3.6%. The Territory’s 10-year average growth in GSP is 2.6%.

The decline in Territory GSP growth was largely driven by a significant fall in investment, particularly private investment associated with the completion of the construction phase of the Ichthys liquefied natural gas (LNG) project. Net exports of goods and services increased however, largely due to LNG exports.

Economic growth is forecast to rise to 6.3% in 2019-20 and 4.1% in 2020-21, largely due to increased LNG exports from the Territory.

Northern Territory GSP, chain volume, inflation adjusted - see above for detailed description of graph
Source: Australian Bureau of Statistics catalogue number 5220.0; Department of Treasury and Finance

Source: Australian Bureau of Statistics catalogue number 5220.0

State final demand

In 2018-19, the Territory’s state final demand (SFD), which measures total domestic expenditure within the local economy, fell by 16.2% to $24.6 billion. The fall in SFD was driven by a decline in private business investment, primarily due to the completion of the construction phase of the INPEX LNG plant.

SFD is expected to fall by 1.7% in 2019-20, before rising to 0.3% in 2020-21.

The continued weakness is due to moderating private sector investment, although receiving some support from smaller scale projects in the investment pipeline. In addition, support will come in the form of increased public investment from the NT Government and defence spending.

With the completion of the construction phase of the INPEX LNG project, business investment is forecast to moderate to the long-term average.

Northern Territory SFD value and YoY growth rates, inflation adjusted - see above for detailed description of graph.
Source: Australian Bureau of Statistics catalogue number 5220.0; Department of Treasury and Finance

Northern Territory state final demand components growth - see above for detailed description of graph.
Source: Australian Bureau of Statistics catalogue number 5220.0; Department of Treasury and Finance

Source: Australian Bureau of Statistics catalogue number 5220.0

Consumption

In 2018-19, consumption expenditure (public and private) comprised 77.1% of SFD. Total consumption expenditure fell by 1.0% to $19.0 billion, driven by a 1.1% decline in household consumption to $11.0 billion and a 0.8% decline in public consumption to $8.0 billion.

The main categories that contributed to the decline in household consumption were:

  • hotels, cafes and restaurants (down by 5.6% to $1.3 billion)
  • recreation and culture (down by 3.3% to $1.0 billion)
  • alcoholic beverages and tobacco (down 3.4% to $0.4 billion).

Partially offset by increases in:

  • rent and other dwelling services (up by 0.3% to $2.9 billion)
  • miscellaneous goods and services (up by 1.1% to $1.9 billion)
  • food (up by 0.8% to $1.02 billion).

State and local government consumption was the main contributor to the fall in government consumption, down 2.7% to $4.8 billion.

Growth in household consumption will moderate over the next few years, before picking up in the outer years as the economy strengthens.

Source: Australian Bureau of Statistics catalogue number 5220.0

Investment

In 2018-19, total investment was $5.6 billion of which $4.0 billion was private sector investment (70%) and $1.6 billion was public sector investment (30%). Total investment decreased by 44.8%, primarily due to a 53.5% fall in private investment. Public investment marginally decreased by 0.4%.

Private business investment is the largest component of private investment and the value of business investment was $3.2 billion, 82% of total private investment and 58% of total investment.

Private business investment is forecast to be lower due to the completion of the INPEX construction phase, and current private investment projects and government capital expenditure are not large enough to offset the fall in total private investment including private business investment.

However, over the medium term, there is a pipeline of major projects in various stages of the approval process, which will support investment and economic growth.

Northern Territory investment, inflation adjusted - see above for detailed description of graph.
Source: Australian Bureau of Statistics catalogue number 5220.0; Department of Treasury and Finance

Source: Australian Bureau of Statistics catalogue number 5220.0

International and interstate trade

International trade

In 2018-19, net exports of goods and services increased by 117.9% to $5.7 billion. This was primarily driven by an increase in merchandise exports of 33.2% to $8.1 billion, offset by a decline in merchandise imports of 29.8% to $2.4 billion. Services exports increased by $6 million to $0.7 billion, while services imports decreased by $149 million to $0.6 billion.

International exports are set to increase significantly over the next couple of years largely due to increased LNG exports from the Territory.

Northern Territory international trade, inflation adjusted - see above for detailed description of chart..
Source: Australian Bureau of Statistics catalogue number 5220.0; Department of Treasury and Finance

Source: Australian Bureau of Statistics catalogue number 5220.0

Interstate trade

The Territory has a large trade deficit with other Australian jurisdictions. The net interstate trade data is part of the ‘balancing item’ in the ABS national accounts. It is estimated that over 90% of balancing item is attributable to interstate trade. In 2018‑19, the balancing item was negative $1.9 billion.

Source: Australian Bureau of Statistics catalogue number 5220.0

Gross value added

In 2018-19, the gross value added of all industries was $26.1 billion, a decrease of 1.5% from the previous year.

The largest sectors in 2018-19 were:

  • mining ($4.7 billion)
  • public administration and safety ($3.3 billion)
  • health care and social assistance ($1.7 billion)
  • construction ($1.6 billion)
  • education and training ($1.2 billion).

The fastest growing sectors in 2018-19 were:

  • mining (46.4%)
  • other services (7.8%)
  • manufacturing (4.1%)
  • healthcare and social assistance (1.1%)
  • information, media and telecommunication services (0.8%).

The sectors that declined most were:

  • construction (-46.6%)
  • accommodation and food services (-15.0%)
  • transport and postal services (-9.6%)
  • rental, hiring and real estate services (‑6.5%).

In 2018-19, the major contributors to GSP growth were:

  • mining (5.7 percentage points)
  • manufacturing (0.1 percentage points)
  • healthcare and social assistance (0.1 percentage points)
  • other services (0.1 percentage points).

In 2018-19, total factor income, in current prices, was $28.6 billion, an increase of 4.0% compared to 2017-18. The gross operating surplus and gross mixed income (GOS / GMI) was $17.0 billion, 59% of the total factor income. The compensation of employees was $11.7 billion. Compensation of employees (COE) decreased by 2.0% and GOS / GMI increased by 8.5% for all industries.

Compensation of employees

In 2018-19, compensation of employees (wages / salaries and employer’s social contribution) decreased by 2.0% to $11.7 billion. The industry sectors with higher compensation of employees included:

  • public administration and safety ($1.9 billion)
  • construction ($1.7 billion)
  • health care and social assistance ($1.5 billion)
  • mining ($1.1 billion)
  • manufacturing ($0.8 billion).

In 2018-19, industry sectors where compensation of employees detracted the most were:

  • construction (down 21.3%)
  • finance and insurance services (down 9.7%)
  • rental, hiring and real-estate services (down 3.9%).
  • mining (up 9.0%)
  • health care and social assistance (up 5.9%)
  • public administration and safety (up 2.7%).

Partially offset by increases in:

  • mining (up 9.0%)
  • health care and social assistance (up 5.9%)
  • public administration and safety (up 2.7%).

Gross operating surplus and gross mixed income

2018-19, GOS / GMI increased by 8.5% to $17.0 billion. The industry sectors with higher GOS / GMI included:

  • mining ($5.5 billion)
  • construction ($2.7 billion)
  • ownership of dwellings ($2.2 billion)
  • rental, hiring and real estate services ($1.0 billion)
  • transport, postal and warehousing ($0.9 billion).

In 2018-19, the sectors where GOS / GMI grew most were:

  • mining (up 91.4%)
  • administrative and support services (up 49.4%)
  • other services (16.1%)
  • public administration and safety (up 14.7%)
  • manufacturing (up 14.6%).

The sectors where GOS / GMI declined were:

  • construction (down 32.4%)
  • arts and recreational services (down 13.0%)
  • information media and telecommunications (down 8.3%)
  • accommodation and food services (down 7.1%).

Source: Australian Bureau of Statistics catalogue number 5220.0

GSP per capita

NT GSP per capita decreased by 1.1% to $106,196 in 2018-19, and despite the decrease had the highest GSP per capita of all jurisdictions. Nationally, GSP per capita was $74,873. The NT and Western Australia were the only jurisdictions to have a GSP per capita over $100,000. NT GSP per capita is influenced by the relatively high paying occupations in the mining industry.

Source: Australian Bureau of Statistics catalogue number 5220.0

The definitions are sourced mainly from the Australian Bureau of Statistics publications.

Gross domestic product (GDP) - total market value of goods and services produced in Australia in a given period after deducting the cost of goods and services used in the production process but before deducting for depreciation.

Gross state product (GSP) - GSP is conceptually equivalent to GDP but refers to production within a state or territory rather than to the nation as a whole.

State final demand (SFD) - the value of total expenditure on goods and services within a state or territory ie total demand for goods and services within a state or territory. It excludes sales as inputs to a production activity, export sales and inventories. It is derived by adding up private and public consumption expenditure, and public and private gross fixed capital formation. It is conceptually equivalent to domestic final demand at the national level.

Final consumption expenditure - bet expenditure on goods and services by persons (households) and general government.

Gross fixed capital formation - expenditure on fixed assets and net expenditure on second-hand fixed assets by the private sector (private gross fixed capital formation) and general government (public gross fixed capital formation).

Compensation of employees - total payment (remuneration), in cash or kind, paid to an employee in return for work done by the employee during the accounting period.

Gross operating surplus - the excess of gross output over costs incurred in producing that output of all financial and non-financial corporate trading enterprises. It is essentially property income and includes corporate profits, interest and rents.

Gross mixed income - return accruing to unincorporated enterprises (family-owned business, owner operators etc) and includes both compensation of employees (returns on labour input) and operating surplus (returns on capital inputs).

Gross value added - the value of goods and services produced in a sector / industry (output) minus the value of consumption of intermediate inputs (output used as inputs for production of goods and services).

Private business investment - it is part of private gross fixed capital formation and includes non-dwelling construction, machinery and equipment, cultivated biological resources (assets such as orchard growth and livestock) and intellectual property products.

Balancing item - implicitly comprises changes in inventories, total net interstate trade, balancing item discrepancy and balance of payments adjustments.

Total factor income - that part of the cost of producing the gross domestic product which consists of gross payments to factors of production (labour and capital). It represents the value added by these factors in the process of production and is equivalent to gross domestic product less taxes plus subsidies on production and imports.

Last updated: 22 January 2020

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