Lead Story
Issue No. 54 - August/September 2010
Spend wisely
As we noted in the last issue of South Australia in-business, the growth rate of Australia’s economy (Gross Domestic Product) from 1990-2009 was 3.2% per annum. In global terms, this was a fast rate for an advanced economy.
However, there were great differences between the States and Territories in the growth rates of their economies (GSP or Gross State Product). Their growth rates (in constant price terms) were (from fastest to slowest):
• Queensland (4.5% p.a.)
• Western Australia (4.2% p.a.)
• Northern Territory (3.6% p.a.)
• Australian Capital Territory (3.2% p.a.)
• Victoria (3.1% p.a.)
• Tasmania (2.6% p.a.)
• New South Wales (2.5% p.a.) and
• South Australia (2.4% p.a.).
Why were these growth rates so different among the States and Territories? In the last issue of in-business we looked at differences in industry structure as a possible reason that might explain these growth rate differences. We concluded that industry sector composition can matter (as in the cases of WA, the Northern Territory and the ACT), but that State (or Territory) economic policy also matters greatly, irrespective of the industry sector composition of each State or Territory.
In this article, we examine whether differences in the composition of demand (differences in expenditure patterns, such as household consumption, business investment and exports) can help explain the growth rate differences among the States and Territories.
The expenditure sectors looked at are:
• Government consumption,
• Household consumption,
• Private investment,
• Public investment,
• Exports of goods, and
• Exports of services.
Sectors omitted include imports of goods and services, the “balancing item”, and the “statistical discrepancy” in the State and Territory product accounts published by the Australian Bureau of Statistics.
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