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 2017-18, the Northern Territory (NT) economy grew by 1.7% to $26.2 billion, as measured by gross state product (GSP) (inflation adjusted). This was below the national rate of 2.8% and less than the 2.7% rate reported for 2016-17. The Territory reported the lowest growth rate of the Australian jurisdictions while the Australian Capital Territory reported the largest increase at 4.0%.

The moderation in Territory GSP growth was largely driven by falling private investment as the construction phase of the Ichthys LNG plant neared completion and the project transitions to the operational and export phase. The fall in private investment was partially offset by an increase in net exports and public investment.

In 2017-18, Territory GSP, in current prices (not adjusted for inflation), increased by 2.3% to $26.35 billion.

Territory GSP is estimated to contract by 0.2% in 2018-19. In 2019-20 the economy is forecast to grow by 6.3%, largely due to increased LNG exports from the INPEX Ichthys plant.

Northern Territory gross state product has grown from 23.9 billion in 2013-14 to 26.2 billion in 2017-18. Gross state product is estimated to decline by negative 0.2 per cent in 2018-19, before growing by 6.3 per cent in 2019-20 and 4.2 per cent in 2020-21. This growth in growth state product is due to the commencement of LNG exports from the ICHTHYS project.
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

Territory state final demand (SFD), total domestic expenditure within the local economy, includes total consumption and total investment. In 2017-18, Territory SFD decreased by 2.7% to $29.5 billion, driven by a fall in private business investment (primarily due to the winding down of the construction phase of the INPEX LNG plant).

SFD is expected to continue declining, estimated to fall by 9.4% in 2018-19 and further decrease by 1.7% in 2019-20. 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 investment phase of the INPEX LNG project, business investment is forecast to moderate to the long-term average.

Northern Territory state final demand growth has been volatile over the past ten years, in line with fluctuations in private business investment which is a key driver of state final demand. State final demand is forecast to decrease by 9.4 per cent in 2018-19 and further decrease by 1.7 per cent in 2019-20.
Source: Australian Bureau of Statistics catalogue number 5220.0; Department of Treasury and Finance

Over the past ten years, private and public investment has been volatile, with private investment influenced by large construction related projects. In comparison private and public consumption growth has been relatively stable over the past 10 years. Private investment is forecast to fall considerably over the coming years, with negative 42 per cent growth in 2018-19 and negative 12.4 per cent in 2019-20.
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 2017-18, consumption expenditure (public and private) comprised 65.9% of SFD. Total consumption expenditure increased by 3.5% to $19.4 billion, driven by a 2.6% increase in household consumption to $11.3 billion and a 4.8% increase in public consumption to $8.1 billion.

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

  • rent and other dwelling services (up by 1% to $3.02 billion)
  • miscellaneous goods and services (up by 2.4% to $1.87 billion)
  • hotels, cafes and restaurants (up by 5.5% to $1.35 billion)
  • recreation and culture (up by 6.9% to $1.1 billion)
  • food (up by 2.4% to $1.03 billion).

State and local government consumption was the main contributor to government consumption, up 6.3% to $4.9 billion, boosted by the NT Government’s capital work program of more than $2 billion in 2017-18.

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 2017-18, total investment was $10 billion of which $8.5 billion was private sector investment (85%) and $1.5 billion was public sector investment (15%). Total investment decreased by 12.8%, due to a 15% fall in private investment. This was marginally offset by a 1.8% rise in public investment.

Private business investment is the largest component of private investment and the value of business investment was $7.7 billion, 91% of total private investment and 77% of total investment. Private business investment is forecast to be lower with the completion of the INPEX construction phase and the 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 has been volatile over the past ten years, driven by expenditure in large construction related projects. Investment is forecast to decrease significantly over the next two years before returning to growth in 2021-22.
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 2017-18, NT international exports increased by 6.1% to $6.4 billion while international imports decreased 15.2% to $3.8 billion. The NT international trade balance increased by 68.8% to $2.6 billion, largely due to a fall in imports for the INPEX LNG plant construction.

International exports are set to increase significantly over the next couple of years as LNG production at the INPEX plant boosts exports significantly.

Exports have trended downwards over the past ten years while imports have been relatively stable. Over the next four years, exports are expected to increase strongly as LNG exports from the INPEX plant commence, boosting the trade balance.
Source: Australian Bureau of Statistics catalogue number 5220.0; Department of Treasury and Finance

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 2017-18, the balancing item was negative $3.2 billion.

Source: Australian Bureau of Statistics catalogue number 5220.0

Source: Australian Bureau of Statistics catalogue number 5220.0

Gross value added

In 2017-18, the gross value added of all industries was $22.5 billion, an increase of 1.5% over the previous year.

The largest sectors in 2017-18 were:

  • mining ($3.2 billion)
  • public administration and safety ($3.1 billion)
  • construction ($2.9 billion)
  • health care and social assistance ($1.7 billion)
  • education and training ($1.2 billion).

The fastest growing sectors in 2017-18 were:

  • administrative and support services (6.3%)
  • health care and social assistance (5.9%)
  • wholesale trade (4.5%)
  • finance and insurance services (4.0%)
  • other services (3.5%).

The sectors that declined most were:

  • manufacturing (-3.1%)
  • arts and recreation services (-2.6%)
  • transport and postal services (-2.3%)
  • information, media and telecommunication services (‑1.7%).

In 2017-18, the major contributors to GSP growth were:

  • health care and social assistance (0.4 percentage points)
  • construction (0.2 percentage points)
  • ownership of dwellings (0.2 percentage points)
  • administrative and support services (0.1 percentage points)
  • mining (0.1 percentage points).

In 2017-18, total factor income, in current prices, was $27.6 billion, an increase of 2.4% compared to 2016-17. The gross operating surplus and gross mixed income (GOS / GMI) was $15.8 billion, 57% of the total factor income. The compensation of employees was $11.8 billion. Compensation of employees (COE) increased by 3% and GOS / GMI increased by 2% for all industries.

Compensation of employees

In 2017-18, compensation of employees (wages / salaries and employer’s social contribution) increased by 3% to $11.8 billion. The industry sectors with higher compensation of employees included:

  • construction ($2.1 billion)
  • public administration and safety ($1.7 billion)
  • health care and social assistance ($1.4 billion)
  • mining ($0.98 billion)
  • manufacturing ($0.81 billion).

In 2017-18, the sectors where compensation of employees grew most were:

  • other services (14.1%)
  • health care and social assistance (7.0%)
  • finance and insurance services (6.6%)
  • mining (4.9%).

The only sector that declined was wholesale trade (‑1.3%) while retail trade had no growth.

Gross operating surplus and gross mixed income

In 2017-18, GOS / GMI increased by 2% to $15.8 billion. The industry sectors with higher GOS / GMI included:

  • construction ($4 billion)
  • mining ($3.1 billion)
  • ownership of dwellings ($2.4 billion)
  • rental, hiring and real estate services ($1.1 billion)
  • transport, postal and warehousing ($0.9 billion).

In 2017-18, the sectors where GOS / GMI grew most were:

  • education and training (7.8%)
  • rental, hiring and real estate services (7%)
  • health care and social assistance (6.5%)
  • wholesale trade (5.8%)
  • finance and insurance services (4.9%).

The sectors where GOS / GMI declined included:

  • professional, scientific and technical services (‑4.2%)
  • administrative and support services (-3.7%)
  • electricity, gas, water, and waste services (-3.3%)
  • information, media and telecommunications (-2.8%).

Source: Australian Bureau of Statistics catalogue number 5220.0

GSP per capita

NT GSP per capita increased by 1.4% to $106,191 in 2017-18, and had the highest GSP per capita of the jurisdictions. Nationally, GSP per capita was $73,267. The NT was the only jurisdiction 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: 14 August 2019

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