Westpac Coast-to-Coast: September 2011

Westpac Coast-to-Coast
September 2011
An update on Australia's state economies
Institutional Bank.
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Contents
Overview The Australian economy States overview: emerging divide States compared and housing update Activity and employment: a state view 4 6 8 10
States New South Wales: hits the wall... Victoria: loss of momentum... Queensland: from laggard to golden state... Western Australia: strong growth, but only a shadow of Boom Mark I... South Australia: Q2 growth welcome, but uncertain future... Tasmania: soft start to 2011... Summary indicators 12 14 16 18 20 22 24
Coast-to-Coast produced by Westpac Economics Editors Andrew Hanlan & Matthew Hassan, Senior Economists Elliot Clarke, Economist Internet: www.westpac.com.au Bloomberg: WBCE <GO> Email: economics@westpac.com.au
This issue was finalised on 23 September 2011
Westpac Coast-to-Coast September 2011
The Australian economy

On 15 July we downgraded our growth forecasts for the world economy and Australia. Recent developments, globally and domestically, have reinforced our expectations that activity will be weaker than suggested by the consensus view. We are forecasting Australian GDP growth to average 1.2% for 2011, upgraded fractionally from 1.0% following the release of the June quarter national accounts, and we have left our growth forecast for 2012 unchanged at 2.5%. The RBA view stands in contrast to ours, with the Bank in their 5 August quarterly Statement on Monetary Policy forecasting growth of 2% for this year and 4% for 2012. We also changed our interest rate forecast to expect a total of 100bps in rate cuts over the course of the 12 months beginning in December 2011. At the time all other forecasters in the official Bloomberg Survey were forecasting rate hikes with a range of 5.0-6.5% in the RBA cash rate by September 2012 compared to our forecast of 3.75%. Over time markets and some forecasters have moved in our direction. However our views remain a considerable distance from Consensus and, more importantly, the views of the Reserve Bank. This edition of Coast-to-Coast emphasises the nature of Australia's two speed economy. Strength in spending has been largely centred on infrastructure in the two resource states. Even within those states housing, consumer spending, non-residential construction and government spending have been soft. Accordingly that mix has meant a considerable deterioration in prospects for NSW, Victoria and those regions of Queensland which are not benefitting from the mining boom. Without doubt Mining Boom Mark II has generated a substantial boost to national income. The terms of trade has surged 39% from the low of 2009Q3 to be at the highest level on record in the June quarter. That said, it has been Westpac's view that this additional income will not accrue broadly across the nation, as was the case in Boom Mark I. Accordingly, the pass-through of the benefits from this boom will be considerably less. That is because those beneficiaries of the income boost, be they government, households or firms, are not spending these gains but are saving. The Commonwealth Government, the largest resident beneficiary, is seeking to tighten fiscal policy by a record 4% of GDP in just 2 years. This compares with the previous boom where the Commonwealth Government was content with holding the Budget at a surplus of "around" 1% of GDP. The employment surge associated with the feeling amongst employers last year that Mining Boom II was likely to bring the labour shortages associated with Boom I is now reversing as employers assess that they have excessively hoarded workers in anticipation of a surge in demand which, apart from in infrastructure, has not arrived. The data used in this Report is only for the period ending the June quarter. Since then much has happened to only further emphasise the nature of this two speed economy. There has been a loss of confidence amongst consumers and business, the labour market has taken a turn for the worse and private business surveys report that business conditions have softened to below trend. Consumer Sentiment declined to be at 96.9 in September, down from an average 103.5 for the June quarter. Employment contracted in both July and August, down a total of 14k, and the unemployment rate increased to 5.3%, up from 4.9% in April. This will weigh on household income growth and reinforce recent consumer concerns about their job security. In this environment consumer spending is set to revert to the subpar pace that has been evident for much of the time since the global downturn. We are forecasting a slowing of consumer spending growth to a sub2% pace for the four quarters to June 2012. The surge in income growth associated with the commodity boom is also coming to end. Westpac's exchange traded Commodity Index (i.e. excluding bulks) has fallen by around 15% since its peak in August. By contrast, bulk commodity prices have been resilient to date but prospects for further gains in the current environment seem remote. There has been some relief for exporters with the fall in the AUD below parity with the USD. This fall however has been associated with a flight of capital out of Asia as investors question the "decoupling" of Asia from the dismal outlook for the US and Europe. As noted above, we expect weakness in housing activity and public demand. Housing activity is forecast to decline by 1% over the year ahead, with a drop in new dwelling construction only partially offset by a rise in renovation work. Public demand growth is forecast to expand by just 1% over the year ahead as the Governments fiscal stimulus package continues to unwind. Despite the Reserve Bank acknowledging the need to revise down their very optimistic growth forecasts which printed in early August there is no recognition of the need for lower interest rates. It seems clear to us that the Australian economy has entered a difficult period where domestic prospects are deteriorating; labour markets are weakening; and dismal news abroad will weigh further on confidence. Australia's great strength in the current global economy is our policy flexibility. Based on anaemic credit growth of 3% and modest falls in house prices it seems clear that interest rates are well into the contractionary zone. With global growth prospects deteriorating there is a strong case for lower interest rates. That will provide a circuit breaker for the current slowing and help moderate the impact on the economy of the global downturn. Bill Evans, Chief Economist
The Australian economy

Chart 1. Chart 2.
Australia: economic outlook

% ann 9
Domestic demand (lhs) GDP Demand, forecast (lhs) GDP, forecast (rhs)
Australia: the domestic growth mix

% ann 9
forecasts to end '12
ppts cont'
contributions to year end domestic demand growth
ppts cont'
2009
2010
2011f
2012f
3 0 0
0
Sources: ABS, Westpac Economics
0
-3 Jun-87
-3 Jun-11
-2 consumer housing business public demand
-2
Jun-91
Jun-95
Jun-99
Jun-03
Jun-07
Chart 3.
Chart 4.
Household savings rate climbs

15 12 9 6 3 0 -3
Sources: ABS, Factset, Westpac Economics
Australia: household demand to soften

% income 15 12 9 6 3 3 0 -3
% income
% ann 9
Household demand GDP H'hld D, forecast (lhs) GDP, forecast (rhs)
% ann 9
-6 Jun-87
-6 Jun-91 Jun-95 Jun-99 Jun-03 Jun-07 Jun-11
-3 Jun-87
-3 Jun-91 Jun-95 Jun-99 Jun-03 Jun-07 Jun-11
Chart 5.
Chart 6.
Jobs market cools, unemployment rises

12 11 10 9 8 7 6 5 4 3 2 Aug-89
Unemployment rate (lhs) Full Time employment * (rhs)
* smoothed
Mining investment booming

130 3 2 1 0 -1 -2 -3 -4 50 Jun-86 Jun-92 Jun-98 Jun-04 Jun-10 70 2 0 90
** Commencements for resource projects (2 qtr avg) excluding Pluto & Gorgon
%
% chg, 6mth
index
private
$bn /qtr
10
Terms of trade (lhs) Infrastructure ** (rhs)
110
8 6 4
Aug-94
Aug-99
Aug-04
Aug-09
Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The results ultimately achieved may differ substantially from these forecasts.
State overview: emerging divide

Demand growth: annual
8 % ann
Jun-10 yr
Jun-11 yr 5.7 5.5
6.6
A change of complexion came over the Australian economy during the last year. At a national level, domestic demand growth slowed, moderating to 3.4% over the year to June, from 4.2% through the previous year. By state, a clear divide emerged between the mining and nonmining states. The upswing in mining investment has propelled Queensland from laggard to leader. Western Australia remains comfortably out in front. By contrast, the non-mining states are suffering most from strong headwinds. Business investment has weakened (with the exception of South Australia) and public investment is losing altitude as fiscal stimulus is unwound. In the case of NSW, where conditions slowed to a virtual standstill, the housing upswing has faltered.
6
4.8
5.2 4.4 4.2 3.4 2.7 1.5
4
2.0 2.1 2.3
2
0.3
0 Tas NSW Vic SA Aus Qld WA
Private demand
% qtr
3 qtr average
% qtr WA Qld 4
4
NSW Vic
Qld's improvement is particularly notable. Domestic demand surged 3.5% in the June quarter, lifting annual growth to 5.7%, up from 1.5% a year ago. Work on major mining projects has commenced, accounting for 3.0% of the 3.5% rise in the June quarter. Conditions outside of business investment were positive, but not buoyant. Western Australia's domestic demand growth is very positive at 6.6% annual. Business investment explains 4.4ppts of this. Consumption growth is very healthy at 5.1%, well above the national pace of 3.2% but still below the highs of Boom Mark I. The NSW economy is at the other end of the spectrum. Demand edged 0.2% higher in the June quarter, expanding by just 0.6% over the last three quarters. All three of the broad investment cycles - housing, business and public - were flat to down through this period. Victoria has been more resilient over the first half of 2011. Even so, annual demand growth has slowed appreciably.
-2 Jun-95
-2 Jun-95 Jun-01 Jun-07
Jun-01
Jun-07
Business investment
18 15 12 9 6 3 0 Jun-90 $bn Equipment Construction $bn
18 15 12 9 6 3 0
NSW + Vic WA + Qld
NSW + Vic WA + Qld
Demand in the Victorian economy expanded by 0.6%qtr, 2.3%yr in the June quarter. The housing sector continues to contribute to growth, with a strong pipeline of new residential building work outstanding. However, approvals are off their high, pointing to prospects of a slowdown. More recently, it is apparent from confidence measures, private sector business surveys and official jobs figures, that conditions in NSW and Victoria have most likely slowed further in the September quarter. As we go to press, the Australian dollar has come under pressure, tumbling below parity against the US dollar. This will provide some relief to trade exposed sectors. The concern of course is that the dollar is weakening because of diminishing global growth prospects. The plus is that Australia has public policy flexibility to respond. The RBA has the scope to cut rates and we expect them to do so.
Jun-98
Jun-06
Jun-90
Jun-98
Jun-06
State overview: emerging divide

Chart 1. Chart 2.
Consumer spend: shifting trends

12 10 8 6 4 2 0 -2 Mar-91
Jobs market correction

% ann 12 8 10
latest 6mths (annualised)
% ann
South East *
* NSW, Vic, SA, Tas, ACT
% chg
6mth, annualised
* smoothed
% chg Qld WA 8 6 4 2 0 -2
Qld, WA, NT
NSW 6 4 2 0 -2 -4 Aug-06
Vic
8 6 4 2 0 -2
-4 Aug-06 Aug-09
Jun-95
Jun-99
Jun-03
Jun-07
Jun-11
Aug-09
Chart 3.
Chart 4.
Dwelling approvals, private

250 index
Jan '09 = 100
Established house prices soften

index
SA Qld WA
250
50 40
% ann
Brisbane Sydney Melbourne Perth
% ann
50 40 30 20 10 0 -10
NSW
Vic
Tas
200
200
30 20
150
150 10 0 -10
Sources: ABS, Westpac Economics Sources: ABS, Westpac Economics
100
100
50 Jul-05
50 Jul-09 Jul-05 Jul-09
-20 Jun-99
-20 Jun-07 Jun-99 Jun-07
Chart 5.
Chart 6.
Population growth moderates

% ann 3
NSW Vic Tas
Non-residential construction pipeline

% ann 3 8
South-east
10
$bn
Non-res. building
Infrastructure
$43bn Gorgon project commences
$bn
90 80 70 60 50 40 30 20 10 0
Approvals qtrly
2 1 0
2 6 1 0 WA Dec-89 Dec-97 Qld SA -1 Dec-97 Dec-05 Dec-05 0 Jun-90 Jun-98 Jun-06 Mar-90 Mar-98 Mar-06 4 2
Qld, WA, NT
Public works boost
Work Yet to be Done South-east Qld, WA, NT
-1 Dec-89
States compared
Chart 1. Chart 2.
Consumption
6 5 4 3 2 1 0 -1 -2 Jun-05
New dwelling construction

% chg, 2 qtrs
Vic
% chg, 2 qtrs
NSW
6 5 4 3 2 1 0 -1 -2
200 180 160 140 120 100 80 60
index
Dec 02 = 100
index
Vic Tas
200 180 160 140 120 100 80 60
WA Qld SA
NSW
WA
Qld
SA
Jun-09
Jun-05
Jun-09
40 Dec-02
40 Dec-02 Dec-08
Dec-08
Chart 3.
Chart 4.
Business equipment investment

index 280 240 200 160 120 80 Dec-02
Business construction investment

index 430 280 240 200 160 180 120 80 130 80 Dec-02 Dec-08 Dec-02 Dec-08 180 130 80 380 330 280 230 index
index
Dec 02 = 100
Dec 02 = 100
430 380
WA
NSW Vic Tas
NSW Vic Tas
WA Qld SA
Qld SA
330 280 230
Dec-08
Dec-02
Dec-08
Chart 5.
Chart 6.
Public investment, general government

280 240
NSW
Exports uptrend, hit by weather disruptions

index 280 25 240 200 160 120 80 40 15 5 -5 -15
index
% ann
smoothed
% ann
NSW Vic
Qld & WA exports hit by disruptions
Dec 02 = 100
25 15 5 -5
WA Qld SA
200 160 120 80 40 Dec-02
Vic Tas
Qld
WA
-15 -25
Dec-08
Dec-02
Dec-08
-25 Jun-96
Jun-02
Jun-08 Jun-96
Jun-02
Jun-08
Housing update
Chart 1. Chart 2.
House prices sliding everywhere except Sydney

70 60 50 40 30 20 10 0 -10 -20 Jul-03 Jul-05 Jul-07 Jul-09 Jul-11 Jul-04 Jul-06 Jul-08 Jul-10
Sources: RP Data-Rismark, Residex (prior to 2004, houses only), Westpac
Auction clearance rates barely at 50%

70 60 50 40 30 20 10 0 -10 -20 90 80 70 60 50 40 30 20 10
Sydney Melbourne
*seasonally adjusted by Westpac
Sources: APM, Westpac Economics
%
Bris Melb Adel Syd Perth
*six-monthly growth rates, annualised
90 80 70 60 50 40
period average
last 2 weekends
30 20 10 0
0 Sep-88 Sep-91 Sep-94 Sep-97 Sep-00 Sep-03 Sep-06 Sep-09
Chart 3.
Chart 4.
Sentiment on time to buy perks up

index 160 140 120 100 80 60
NSW Vic Qld WA
... and Qld firm in NSW, at a 2yr high in Vic ...
Housing affordability not overly stretched

index 160 140 120 100 80 60 40 90 80 70 60 50 40 30 20 10
Sources: REIA, ABS, RBA, Westpac
%
Sydney Melbourne Brisbane Perth Adelaide
improve deteriorate
90 80 70 60 50 40 30 20 10 0
40 Sep-08 Sep-09 Sep-10 Sep-11 Sep-08 Sep-09 Sep-10 Sep-11
Source: Melbourne Institute, Westpac Economics
0 Sep-65
*measure based on servicing mortgage of 75% median house price and avg wage, estimated to Sep-11
Sep-75
Sep-85
Sep-95
Sep-05
Chart 5.
Chart 6.
Rental mkts: Melb loosening; Bris, Perth tighter

7 6 5 4 3 2 1
Syd Melb Adel Bris Perth
Dwelling approvals: softening across the board

200 180 160 140 120 index
Vic (36%) Qld (18%) WA (13%) NSW (20%)
%
*rolling annual average
Source: REIA, Westpac Economics
vacancy rates
%
latest
7 6
index
200 180 160 140 120 100 80
latest
5 4 3 2 1 0
smoothed, Dec 2005 = 100 figures in brackets show %total
100 80 60
Sources: ABS, Westpac
60 40 Dec-07 Dec-08 Dec-09 Dec-10
0 Mar-88 Mar-94 Mar-00 Mar-06 Mar-88 Mar-94 Mar-00 Mar-06
40 Dec-05
Dec-06
Activity and employment: a state view

Chart 1. Chart 2.
State jobs markets, in transition

110 106 102 98 94 90 Aug-07 index
Dec 08 = 100
Australia: jobs & domestic demand

index
monthly
110 106 102 98
6 4 2 0 -2
% ann
% ann
Jobs correction
10 8 6 4 2
NSW Vic
Qld
WA
NSW & Vic, soft spot following strong run

0
Jobs * (lhs)
updated 19 Sep * qtrly average
Mining states, set for a strong run
94 90
-2 -4 -6 Jun-11
Domestic demand, adv 2qtrs (rhs)
Aug-10
Aug-07
Aug-10
-4 Jun-86
Jun-91
Jun-96
Jun-01
Jun-06
Chart 3.
Chart 4.
NSW: jobs & demand

10 8 6 4 2 0 -2 -4 Jun-86
* smoothed, ** qtrly, average
Victoria: jobs & demand

% ann
Domestic demand adv 2 qtrs *, lhs Jobs **, rhs
% ann
7 6 5 4 3 2 1 0 -1 -2 -3
10 8 6 4 2 0 -2 -4 -6
% ann
% ann
10 8 6 4 2 0 -2

-4 -6 -8
Jun-91
Jun-96
Jun-01
Jun-06
Jun-11
-8 Jun-86
Jun-91
Jun-96
Jun-01
Jun-06
Jun-11
Chart 5.
Chart 6.
Qld: jobs & demand

14 12 10 8 6 4 2 0 -2 -4 -6 Jun-86 Jun-91
WA: jobs & demand

% ann 8 12 6 4 2 0 -2 -4 Jun-11 8 4 0 -4 -8 Jun-86
% ann
16
% ann
% ann
8 6 4 2 0 -2 -4
Jun-96
Jun-01
Jun-06
Jun-91
Jun-96
Jun-01
Jun-06
Jun-11
10
Westpac market outlook September 2011
Activity and employment: a state view

2009/10 2010/11f 2011/12f State government forecasts 2.25 3.00 2.25 3.10 2.50 3.50 0.00 2.50 3.50 1.75 4.00 3.00 1.75 1.50 3.50 1.75 2.50 1.00 3.00 1.75 5.00 3.00 2.75 1.50 4.50 2.50 1.75 0.50 2010/11f Westpac** 1.9 (a) 2.9 (a) 2.00 3.2 (a) 2.00 3.5 (a) 0.00 2.4 (a) 3.00 1.7 (a) 4.00 3.2 (a) 1.25 1.4 (a) 2011/12f
Australia *
GDP Employment GSP Employment GSP Employment GSP Employment GSP Employment GSP Employment GSP Employment
2.3 1.4 1.7 1.2 2.0 2.8 1.6 0.9 1.5 0.9 4.3 0.3 0.4 -1.6
1.50 0.50 1.00 0.25 1.00 0.25 3.50 1.50 0.75 0.25 4.00 2.00 0.50 0.25
NSW
Vic
Qld
SA
WA
Tasmania
* Government forecasts for Australia are a weighted average of the state government forecasts. ** Westpac's state numbers are not calculated directly. They are estimated from Westpac's forecast for Australia.
Gross State Product

2004/05 NSW Vic Qld WA SA Tas NT 2.0 2.7 5.0 4.3 1.0 2.3 5.5 2005/06 2.1 2.5 4.2 5.6 2.7 2.7 6.7 2006/07 2.8 3.6 5.4 4.4 2.1 2.5 4.4 2007/08 3.4 3.6 4.2 4.2 5.6 4.4 4.4 2008/09 1.1 0.9 0.2 4.1 2.1 3.4 5.1 2009/10 1.7 2.0 1.6 4.3 1.5 0.4 1.3 2010/11f 2.25 2.50 0.00 4.00 3.50 1.75 2.20 2011/12f 2.50 3.00 5.00 4.50 2.75 1.75 3.20
State Government forecasts from state budget papers. The ABS estimates GSP only on an annual basis. History is from the 2009/10 State Accounts.
Employment
2004/05 NSW Vic Qld WA SA Tas 1.2 3.1 5.4 4.1 1.6 2.6 2005/06 2.0 2.3 4.0 5.5 2.5 3.4 2006/07 2.1 3.2 4.8 3.0 2.0 0.8 2007/08 2.9 3.2 3.0 4.1 2.1 2.9 2008/09 0.7 0.8 2.8 3.9 1.7 2.9 2009/10 1.2 2.8 1.0 0.3 0.9 -1.6 2010/11 3.1 3.5 2.3 3.2 1.8 1.4 2011/12f 1.75 1.75 3.00 2.50 1.50 0.50
History from ABS. Forecasts from state government budget papers.
11
NSW: hits the wall...

Domestic demand
10 8 6 4 2 0 -2
% ann
NSW Australia
% ann
10 8 6 4 2 0 -2 -4
The NSW economy has lost momentum. The growth spurt that emerged for five quarters following the 2008/09 downturn has clearly faded. Demand grew by just 0.2% in the June quarter, following gains of 0.3% in Q1 and 0.1% in Q4. This comes after demand leapt 6.3% over the five quarters to 2010Q3. So why the loss of momentum? The state, right now, is without an investment driver. Dwelling investment has stalled, business investment has moved lower and public investment is losing altitude. Little wonder the labour market has cooled. Employment declined by -28k over the six months to August, a marked turnaround from the brisk 4.0% rise through 2010. This has driven up the trend unemployment rate to 5.3% from 4.9%.
-4 Jun-87
Jun-91
Jun-95
Jun-99
Jun-03
Jun-07
Jun-11
The investment cycles

15 12 9 6 3 0 Jun-87
$bn
Business Public Housing
Total investment: +12%yr to Sep 10 -4% over 3 qtrs to Jun 11
$bn
15 12 9 6 3 0
Unwinding of the Federal Government's aggressive fiscal stimulus package is now a headwind to growth. Public investment, despite edging 1% higher in Q2, is down 12.5% from the peak of 2010Q1. The private sector has, to date, failed to fill the gap. There is no doubt that parts of the economy are doing well. Coal producers are expanding output and receiving excellent prices. Agriculture has been blessed with favourable seasonal conditions. Together, this has export goods volumes up 8% on a year-ago. Another plus is infrastructure, with a burst of work lifting activity to 20% above that of a year ago. However, in the main, the state is feeling the ill effects of strong headwinds. Interest rates, the strong dollar, global volatility and consumers desire to pay down debt are all constraints. Weak credit growth is constraining the financial sector.
Jun-91
Jun-95
Jun-99
Jun-03
Jun-07
Jun-11
NSW jobs market corrects

'000 50 30 10 -10 -2 -30
Jobs, mth chg (lhs) Jobs 6mth chg, annls'd* (rhs)
* smoothed
% ann
6 4 2 0
The housing construction upswing has faltered. New residential building work was down 3% over the last three quarters, following a 20% rise over the previous year. Moreover, approvals slumped 17% in the June quarter. Renovation work, while volatile from quarter to quarter, levelled out over the last year as the labour market weakened. Business investment has failed to gain traction, declining 5% over the first half of 2011. Equipment spending edged lower and non-residential building activity slumped 18%. With business confidence sliding into negative territory the risk is for further downside over the second half of 2011. The NSW consumer could be forgiven for going on strike given this environment. Spending was actually reasonably solid, up 0.7%qtr, 2.8%yr in the June quarter. Whether this will be sustained is questionable.
-4 -6 Aug-07 Aug-09 Aug-11
-50 Aug-05
12
... as investment drivers falter

Chart 1. Chart 2.
Contributions to state final demand

30 Consumption Housing Investment Public Final demand -2 0 ppts 2
0.6 0.2 1.7 1.7
Exports responding to strong demand

% ann
exports of goods, smoothed
% ann
NSW Australia
30
20
yr Jun 10
20
0.2 0.0 2.5 0.3
yr Jun 11
10
10
4.8 2.1
0
Sources: ABS; Westpac Economics
0
WA & Qld exports hit by cyclones & flooding
-10 Jun-91
-10 Jun-03 Jun-07 Jun-11
Jun-95
Jun-99
Chart 3.
Chart 4.
Housing construction, set for downturn

80 60 40 20 0 -20 -40 -60 Jun-91
Public investment, unwinding stimulus

% ann 80 60 40 20 0 -20 -40 -60 4 0 -4 Jun-90
* smoothed
% ann
New dwelling investment Approvals, adv 2qtrs
% ann 12 8
Demand Private demand Public demand *
Public investment
$bn qtr
6 5 4 3 2 1 0
General government Public corporations
Jun-95
Jun-99
Jun-03
Jun-07
Jun-11
Jun-98
Jun-06
Jun-90
Jun-98
Jun-06
Chart 5.
Chart 6.
Business investment
12 10 8 6 4 2 0 Jun-87 $bn

$bn 12 10 8 6 4 4 2 0 2 0 Jun-89
10 8 6
$bn
Non-res. building
Work done Yet to be done Approvals
Infrastructure
Work done Yet to be done Commencements *
* 2qtr avg
$bn
10 8 6 4 2 0
Equipment * Non-residential building Engineering

* including computer software etc
Jun-91
Jun-95
Jun-99
Jun-03
Jun-07
Jun-11
Jun-97
Jun-05
Jun-89
Jun-97
Jun-05
13
Victoria: loss of momentum...

Domestic demand growth moderates
10 8 6 4 2 0 -2 -4 -6 -8 Jun-87
% ann
% ann
10 8 6 4 2 0 -2 -4 -6
The Victorian economy, which briefly outperformed in 2009/10, has since lost momentum. State demand growth was 0.6%qtr in Q2, from a downwardly revised 1.4% gain in Q1. As a result, annual state final demand growth decelerated to 2.3%, compared to the nation's 3.4% gain. The earlier outperformance was notable for Victoria's low exposure to resource sector growth with housing construction and business investment holding up much better than in other states. Going forward however, the state faces a number of challenges including: ongoing consumer caution, the high Australian dollar (which is a major headwind for Victorias manufacturing exporters), interest rates and slower population growth. Victoria's housing market also faces a more challenging outlook. Although the state continues to lead the way in providing affordable new dwellings (especially compared to Sydney and parts of Qld) a significant round of new supply is coming on stream at a time when demand is soft at best.
Victoria
Australia
Jun-92
Jun-97
Jun-02
Jun-07
-8 Jun-12

Consumption Housing Investment Public Final demand -2 0 0.6 0.5 0.1 -0.5 0.4
1.6
2.1
yr June 10 yr June 11
Household consumption was the primary driver of growth in Q2, up 1.8% in the quarter, to be 3.8% higher over the year. Housing investment was also strong in Q2, rising 3.0% on strength in new construction and renovations. Annual growth in Victorian housing investment remains very strong, particularly compared to the rest of the nation. However, business investment was a large drag on demand growth in Q2, falling by 3.9%. Public demand was broadly unchanged in the period, despite a decline in public investment.
2.6 5.2 4 6
2.3 2 ppts
The Victorian jobs market has cooled but is still reporting gains. Jobs advanced by an above par 3.4% through the year to November 2010. While, for the first eight months of 2011, employment rose by a modest 0.6%. The trend unemployment rate has edged higher, rising to 5.1% from 4.9%. Male employment, which tends to be more cyclical, has declined of late.
Victoria: economic performance & outlook

8 6 4 2 0 -2 -4 -6 1990/91
Sources: ABS, Vic Gov't, Westpac Economics
The Melbourne housing market has outperformed in recent years but has shown an abrupt cooling-off since late 2010.
8 6 4 2 0
% chg
3.5%, decade average
% chg
Gross State Product
State demand
State Gov't f'csts
-2 -4 -6
Melbourne house prices have slipped lower, with the official ABS measure showing detached house prices down 2% since June 2010. More timely and broader private sector measures suggest dwelling prices have fallen by as much as 5.7% from their 2010 peak, a material correction and a weaker outcome than the 3.3% decline nationally on these measures. Latest auction market data confirm the slowdown. The Melbourne real estate market faces a challenging environment with a significant increase in newly completed dwelling stock coinciding with weakening demand due both to interest rate rises and a rapid slowing in, previously very strong population growth. The population slowdown is particularly abrupt for foreign student arrivals, a significant driver of demand for near-city unit developments.
1994/95
1998/99
2002/03
2006/07
2010/11
14
... highlights challenges ahead

Chart 1. Chart 2.
Jobs growth moderates

40 30 20 10 0 -10 -20
* smoothed
Population growth has turned

% ann 8 6 4 2 0 -2 -4 -6
'000
Jobs, mth chg (lhs) Jobs, 6mth chg, annual'd* (rhs)
2.5 2.0 1.5 1.0 0.5
% ann
Vic (1.6%yr, +86k) Vic conbrib from net migration (0.9ppt, +48k) Australia
% ann
2.5 2.0 1.5 1.0 0.5
-30 Aug-05
Aug-07
Aug-09
Aug-11
0.0 Dec-82
0.0 Dec-87 Dec-92 Dec-97 Dec-02 Dec-07
Chart 3.
Chart 4.
Vic consumers less fixated on saving

12 9 6 3 0
avg since 2008
New Residential building

% ann 12 9 2.5 6 3 0 2.0 9 1.5 1.0 0.5 0.0 Jun-89
Victoria
% ann
Labour income
*real
3.5 3.0
$bn/qtr
Activity
Approvals
Private
000/qtr
18 15 12
Consumption
6
NSW Victoria NSW
3 0
-3 Jun-99
-3 Jun-07 Jun-11
Jun-03
Jun-97
Jun-05
Jun-89
Jun-97
Jun-05
Chart 5.
Chart 6.
Business investment: patchy

7 6 5 4 3 2 1 0 Jun-91 Jun-95 Jun-99 Jun-03 Jun-07 Jun-11 $bn

$bn 7 6 5 4 3 2 1 0 0 Jun-89 0 Jun-97 Jun-05 Jun-89 Jun-97 Jun-05 4 2 8 6 $bn Non-res. building
Infrastructure
$bn 8
Equipment
*new
Non-residential building Engineering
Work done Yet to be done Commencements *

* 2qtr avg
6 4 2
15
Queensland: from laggard...

Domestic demand, Qld in front!
15 12 9 6 3 0 -3 -6 Jun-89 Jun-93 Jun-97 Jun-01 Jun-05
prev. est
% ann
% ann Qld Australia
15 12 9 6 3 0 -3 -6
In the last issue of Coast to Coast, we highlighted how the Qld economy had fallen well behind the rest of the nation, with annual state final demand growth of just 1.2% to Q1. However, in the June quarter GDP release, all of this changed as the Qld economy went from laggard to boom state. The strong Q2 outcome (+3.5%qtr) was exaggerated by an initial rebound from the weather-hit Q1. More importantly though the release showed large-scale upward revisions to previous growth estimates and a long-awaited upswing in business investment. The end result lifted annual growth over the year to June to 5.7%, second only to WA and well above the nation's 3.4% growth pace. Both the Q2 outcome and back revisions were principally the result of stronger business investment. In Q2, business investment was up 17%qtr (33%yr). Although the strength was broad based, the 29%qtr (90%yr) gain in infrastructure construction was especially eye-catching. As we have previously highlighted, Qld is set to benefit greatly from the development of the LNG industry, with around $50bn to be invested in coming years. Not only will the initial investment spend provide a boon for activity in the state in coming years, but once completed, these projects will provide Qld with a sizeable new industry that will boost export volumes materially. However, until that time, Qld's growth will remain dependent on the coal industry, which is recovering from January's floods. In Q2, coal exports recovered somewhat, with volumes up 7% in the quarter. But volumes are still 17% lower than a year ago. It will take the rest of 2011 for the industry to fully recover. The picture is considerably weaker outside sectors and components directly tied to the mining boom. At 0.7%, Qld consumption growth was improved in Q2 but is still softer than the rest of the nation. Qld's housing sector is very weak. House prices have significantly underperformed and dwelling approvals are at historical lows. January's flood disaster hit the industry hard, but associated rebuilding is expected to give a boost. That rebuild has yet to begin and may be bypassing the approvals data as councils have waived approval requirements.
Jun-09
Consumption Housing Investment Public Final demand -2 0 -1.4
0.7 1.1
1.7
yr to Jun 2010 yr to Jun 2011
-1.3 0.4 1.2 1.5 2 ppts 4
5.2
5.7 6
Business investment, regains momentum

7 6
Equipment
$bn
$bn
+64% 2011H1
7 6 5 4 3 2 1 0
5 4 3 2 1 0 Jun-91
Non-residential building Infrastructure
The weakness is much more than just a hit from weather disasters though. It has been sustained for longer and is geographically diverse the biggest fall-off has been in the Gold and Sunshine Coasts and in Cairns and the Far North. The impact of a high AUD on Qld's tourism sector, subdued investor and second home demand, financing problems affecting high-rise and prestige property are all factors. This highlights Qld's more diverse economy compared to WA where mining is more dominant. How well growth is sustained in Qld depends critically on the degree to which the mining boom offsets weakness elsewhere and how much the uplift spills into demand in non-mining sectors. The labour market will be key to judging the balance. Jobs growth is currently weakening and below the national average. How it responds as the investment upturn unfolds will be critical.
Jun-95
Jun-99
Jun-03
Jun-07
Jun-11
16
... to golden state in one step

Chart 1. Chart 2.
Flood-affected exports yet to bounce back

20 15 10 5 0 -5 -10 -15 -20 Mar-91
Brisbane house prices: down 5% over the year

% ann 20 15 10 5 0 -5 10 0 -10 Jun-89
% ann
40 30
% ann
Brisbane
% ann
40 30
Capital cities avg.
20
20 10 0
2011Q3 is an estimate based on RP Data-Rismark figures for July
Qld
Australia
-10 -15
exports of goods, trend
-20 Mar-03 Mar-07 Mar-11
-10 Jun-01 Jun-05 Jun-09
Mar-95
Mar-99
Jun-93
Jun-97
Chart 3.
Chart 4.
Qld housing sector in very weak state

'000 5 4 3 2
-32%
Sources: ABS, Westpac Economics *smoothed
Qld dwelling approvals: now and then

'000 14 13 12 11 10 9 8 7 0 average 2006-08 average 2009-11 0 5 5 15 20 thousands thousands Brisbane (-18%) Gold and Sunshine coasts (-39%) Cairns and Far North Qld (-48%) Rest of Qld (-26%) Sources: ABS, Westpac Economics
Private dwelling approvals

Qld (lhs) Australia, ex Qld (rhs)
20
15
10
10
1 Jul-88
Jul-92
Jul-96
Jul-00
Jul-04
Jul-08
6 Jul-12
Chart 5.
Chart 6.
Qld labour market has slowed markedly

8 6 4 2 0 -2 -4 Aug-91
Qld jobs (lhs)
Construction investment looks set to surge

% 12 10 8 6 4 6 5 4 3 2 1 0 Jun-89
updated: 16 Sep 11
% ann
trend
$bn
Non-res building
Work done Work yet to be done Approvals
Infrastructure
$bn
20 16 12 8 4 0
Work done Yet to be done Commencements, 2qtr avg
Aust jobs (lhs)
un. rate, Qld (rhs)
Aug-95
Aug-99
Aug-03
Aug-07
0 Aug-11
Jun-97
Jun-05
Jun-89
Jun-97
Jun-05
17
Western Australia: strong growth...

State demand: WA growth 2x the national pace
16 12 8 4 0 -4 -8 Jun-87
% ann
WA Aust
% ann
16 12 8 4 0 -4 -8
WA is looking considerably more 'boom-like' with state demand now growing at double the national rate, but current conditions are still much more subdued than in mining boom Mk I. WA's consumer and housing sectors are particularly lacklustre and labour market conditions remain very mixed. Growth in Q2 fell back to a still healthy 1.0%qtr pace after Q1's 4.5% surge initially reported as +3.2%qtr. Annual growth decelerated from 7.9%yr to 6.6%yr in Q2 but that is still almost twice the pace of annual national growth. Q2's growth was the result of strength in private demand (+1.9%qtr): household consumption remained strong (+1.8%qtr); business investment was also robust (+2.8%qtr, +14%yr) thanks to strong growth in equipment and non-residential construction investment engineering construction pulled back 2.3% after a strong Q1. WA growth is looking better compared to the rest of the nation but remains well under the 'red-hot' double-digit expansion rates sustained for two years during mining boom Mk I.
Jun-91
Jun-95
Jun-99
Jun-03
Jun-07
Jun-11
Consumption Housing Investment Public Final demand 0 2 0.5 0.5 1.0
2.3 2.2
The chart to the left shows how investment is leading the current acceleration in WA state demand. The one below shows how growth contributions in the year to Jun 2011 compare to those at the height of the first mining boom. What is immediately apparent is the much more restrained performance of WA's consumer and housing sectors and the absence of support from public demand. In the case of WA's consumers, this is coming despite real labour incomes soaring 13.2% in the year to June a stronger rise than any recorded during the first mining boom. Total consumption rose just 4.3% over the same period again, strong compared to the nation but well off the pace for a resource state in boom mode.
8
4.0 2.0 5.5 6.6 4 ppts 6
0.0
Meanwhile, WA's housing sector is not just subdued but looks decidedly out of sorts. Dwelling investment has had a brief burst (+7.1%yr to June) but approvals point to a sharp reversal ahead. Perth house prices have continued their dismal run and have consistently under-performed since mid-2007.
Contributions to demand: boom Mk I vs Mk II

Consumption Housing Investment Public Final demand -3 0 1.0 0.9 0.5
2.2
3.8
4.0 flat
5.7
10.8 6.6 3 ppts 6 9 12
The mixed performance is apparent in WA's labour market as well. Since 2008, average jobs growth has been basically on a par with that seen nationally, albeit with more volatility (much weaker in 2008-09 and a stronger rebound in 2009-10). Momentum failed to return to previous peak growth rates and is now slowing in line with that seen nationally. The industry split on jobs shows sectors directly exposed to the mining boom are experiencing strong hiring similar to the first boom but much more subdued jobs growth in government-dominated sectors and outright labour shedding amongst manufacturers and consumer sectors. The 'silver lining' of this mixed performance is that the state is not running into anything like the capacity and skill shortages seen in the first boom. However, job vacancy data shows there are still considerable labour supply pressures. Indeed, these appear to be occurring at a higher unemployment rate, suggesting skills mismatches may be more of a problem.
18
... but only a shadow of Boom Mark I

Chart 1. Chart 2.
Jobs growth slowing and unboom-like in WA

8 6 4 2 0 -2 -4 -6 Aug-91
WA jobs (lhs) Aust jobs (lhs) un. rate, WA (rhs)
WA private capex: epicentre of the boom

12 10 8 6 4 2 7 6 5 4 3 2 1
Source: ABS, Westpac Economics
% ann
%
*trend
WA Govt Forecast (year avg)
$bn
engineering construction non- residential building equipment
*real, private sector 5-fold increase in 6yrs
$bn
7 6 5 4 3 2 1 0
Aug-95
Aug-99
Aug-03
Aug-07
Aug-11
0 Mar-91
Mar-95
Mar-99
Mar-03
Mar-07
Mar-11
Chart 3.
Chart 4.
WA consumers: income soars, spending subdued

16 14 12 10 8 6 4 2 0 -2 -4 Jun-99
Perth house prices: no Mk 2 boom here

% ann 45
Perth capital cities avg.
% ann
labour income consumption
*real
% ann
14 12 10 8 6 4 15 30
% ann 45
*2011Q3 estimate based on Residex figures for July
30
15
avg since 2008
2 0 0
Mining boom MkI
MkII
-2 -4 -15 Sep-91 Sep-95 Sep-99 Sep-03 Sep-07 -15 Sep-11
Jun-03
Jun-07
Jun-11
Chart 5.
Chart 6.
WA employment by sector: very uneven

5 4 3 2 1 0 -1 -2
*contribution to total state employment growth (ann avg)
Source: ABS, Westpac Economics
WA labour supply pressures ease back a touch

ppts 5 4 140 120 100 80 60 40 20
ppts mining, utilities, constn manufacturing educ, health, govt
%
job vacancies %unemployed seeking full time jobs (vacancy survey not conducted between Jun-08 and Dec-09)
business services consumer

with a mix of strong ...
140 120 100
3 2
jobs outnumber pool of job seekers
... not so strong ...
80 60 40 20
1 0
WA Australia
... and weak
-1 -2 -3
-3 May-03
May-06
May-09
0 0 Dec-83 Dec-87 Dec-91 Dec-95 Dec-99 Dec-03 Dec-07 Dec-11
19
South Australia: Q2 growth welcome...

Domestic demand
10 8 6 4 2 0 -2
% ann
SA Australia
% ann
10 8 6 4 2 0 -2 -4
South Australian growth underwent a resurgence in Q2, with activity rising by 2.0% in the quarter; the Q1 outcome was also revised up from 0.8% to 0.4%. Despite this, annual growth was little changed at 2.7%, owing to a base effect. Public demand jumped 2.8% in the quarter thanks to a 10% surge in public investment. However, as is the case across the rest of the nation, with no new stimulus initiatives and budget pressures rising, there is little reason to believe that public spending will provide material additional support for state demand going forward. Private demand will therefore be the sole driver of growth going forward. For this sector, there is no clear cut story. This is quite a contrast to WA and Qld where the mining boom is providing multi-faceted support and Victoria, where the household sector remains a strong driving force for growth. SA growth thus seems destined to remain sporadic that is unless the resource boom finally reaches SA's soils.
-4 Jun-91
Jun-95
Jun-99
Jun-03
Jun-07
Jun-11

Consumption Housing Investment Public Final demand -2 0 ppts -0.6 -0.4
1.3 1.1 0.3 0.8
One of the other hot spots of Q2 in SA was dwelling investment: it rose by 13% in the quarter on the back of double-digit gains for new housing and alterations & additions; over the year, housing investment is up 12% in SA, compared to a broadly flat outcome for the nation as a whole. The strength of housing demand is quite a contrast to the recent growth in SA household consumption which was weak in Q2 (0.4%) and is little changed over the year compared to +3.2%yr for the nation as a whole. While the fundamentals for SA housing demand and consumption are somewhat supportive, partial data indicates momentum is waning. Specifically, although the SA unemployment rate has, as yet, not followed the national series higher, employment growth has slowed markedly through mid 2011. Further, SA population growth moderated through 2010 to around 1%yr that is below the1.5%yr growth seen nationally.
-0.1 1.9 2
2.9 3.2 4
SA economic performance & official outlook

8 6 4 2 0 -2
Sources: ABS, SA Gov't, Westpac Economics
% ann
GSP State demand
% ann
SA govt estimates and forecasts
8 6 4 2 0 -2 -4
So with public demand unlikely to support growth in coming quarters and the key supports for household demand employment and population growth, not to mention sentiment having softened in recent months, business investment will increasingly become the key determinant of SA growth. In this regard, Q2 gave hope that business investment is indeed capable of providing the SA economy with the support it needs. Over the past year, investment growth has accelerated to almost 15%yr; further, this strength has been fairly broad based across engineering and non-residential construction and equipment spending. While the immediate outlook for investment activity is positive, the absence of material planned (or even mooted) projects is a serious concern. Yes it is true that the Olympic Dam expansion may happen (at some point), but other than that there is little else on the horizon that certainly gives cause for concern.
-4 1990/91
1994/95
1998/99
2002/03
2006/07
2010/11
20
... but future remains uncertain

Chart 1. Chart 2.
Exports boom on good crop & mining capacity

40 30 20 10 0 -10 -20 -30 Jun-91
SA jobs market at a turning point

40 30 20 10 0 -10 -20 -30 20 15 10 5 0 -5 -10 -15 Aug-05
Jobs, mth chg (lhs) Jobs 6mth chg, annls'd* (rhs)
* smoothed
% ann
* exports of goods, smoothed
% ann
SA Australia
'000
% ann
Jobs contract 5 mths to Aug
8 6 4 2 0 -2 -4 -6
Jun-95
Jun-99
Jun-03
Jun-07
Jun-11
Aug-07
Aug-09
Aug-11
Chart 3.
Chart 4.
Population growth slowing but historically high

2.5 2.0 1.5 1.0 0.5
regional migration schemes expanded
Private dwelling approvals weaken

2.5 2.0 1.5 1.0 0.5 0.0 1.3 1.1 0.9 13 0.7 11 0.5
% ann
% ann
'000
SA (lhs) Australia (rhs)
'000
19 17 15
SA
Australia
9 7 Jul-93 Jul-97 Jul-01 Jul-05 Jul-09
0.0 Dec-90
Dec-94
Dec-98
Dec-02
Dec-06
Dec-10
0.3 Jul-89
Chart 5.
Chart 6.
Business investment: infrastructure strength

1.6 $bn
Equipment
Pipeline supportive, but not explosive

1.6 3.0 2.5 1.2 2.0 $bn Non-res. building Infrastructure
$bn
$bn
3.0 2.5 2.0 1.5 1.0 0.5 0.0
1.2
Work done Yet to be done
0.8
0.8
1.5 1.0
0.4
0.4 0.5
0.0 Jun-89
0.0
Jun-93
Jun-97
Jun-01
Jun-05
Jun-09
0.0 Jun-89
Jun-97
Jun-05
Jun-89
Jun-97
Jun-05
21
Tasmania: soft start to 2011...

Domestic demand
% ann 16 12 8 4 0 -4 -8 Jun-91
% ann 16 12 8 4 0 -4 -8 Jun-95 Jun-99 Jun-03 Jun-07 Jun-11
Tasmania
Australia
The first half of 2011 saw a softening of conditions for Tasmania. Demand was flat in the March quarter and then contracted by 0.5% in the June quarter. This lowered annual growth to 2.0%, the slowest of any of the states. A temporary negative was the disruptions earlier this year caused by the devastating events in Japan, a key trading partner of Tasmania. Unwinding of fiscal stimulus measures is proving to be a particularly strong headwind for Tasmania. Overall public demand for the state contracted by 4.2% over the first half of 2011. This subtracted 1.2ppts off state demand. The next largest subtraction over this period was for Qld, of -0.4ppts. This has triggered a pronounced weakening of household demand. Consumer spending all but stalled over the first half of the year. Only South Australia saw a weaker outcome. The consumer spending strike is against the backdrop of labour market weakness, with total employment contracting by almost 1% in the four months to August. The housing sector is also feeling the impact of headwinds, notably interest rates and a slowing of population growth. New dwelling construction contracted in the June quarter, declining by -1.1%qtr, -6.2%yr. Approvals have softened in recent months, pointing to further declines over the second half of 2011. Weakness was also apparent in renovation work, which slumped by more than 10% in the June quarter - albeit following a near 12% rise for the March quarter. Business investment continues to be volatile from quarter to quarter. Some resilience was evident in the June quarter. Equipment investment recovered further, rising by $54mn, up 17%, to be 40% above that for June quarter 2010 but 28% below the pre-crisis peak. The investment outlook remains uncertain. Non-residential building approvals are weak and infrastructure commencements have softened. Business confidence has slumped, to be approaching the lows of late 2008. A plus is the very recent retreat in the dollar and hopes of interest rate cuts.
Consumption Housing
-0.1
0.7 0.5
yr Jun 10 yr Jun 11
-2.0 Investment Public Final demand -4 -2
-0.2
1.8 -0.2 0.3 0 ppts 2.0 2.0
Economic performance & outlook

9 7 5 3 1 -1 -3 1990/91
Sources: ABS, Tas Government, Westpac Economics
The Tasmanian Government, in the state budget of 16 June, was cautious in their depiction of economic prospects.
% chg 9 7 5 3 1 -1 -3
% chg
GSP State demand
State gov't f'csts
Economic growth is forecast at 1.75% for 2011/12, the same growth expected for 2010/11. This is below the 20 year average of 2.4%. Two primary concerns are: the shortage of major new private investment projects in the state and the structural challenges created by the mining boom. For the forestry sector, concerning is a large reduction in woodchip sales and large scale closure/downsizing of mills and other timber operations. While, the manufacturing sector, tourism and education services to students from overseas are all confronted with adjusting to the strong exchange rate.
1995/96
2000/01
2005/06
2010/11e
22
... on household sector weakness

Chart 1. Chart 2.
Population growth moderating

2.5 2.0 1.5 1.0 0.5 0.0
Employment remains below 2008 peak

% ann 2.5 2.0 1.5 1.0
210 250 240 230 220 8 200 190
% ann
Tas Aust
'000
Employed, 3mth avg (lhs) Unemployment rate, trend (rhs)
14 12 10
Gov't f'csts
0.5 0.0 -0.5 Dec-88 Dec-93 Dec-98 Dec-03 Dec-08
6 4 2 Aug-95 Aug-99 Aug-03 Aug-07 Aug-11
-0.5 Dec-83
180 Aug-91
Chart 3.
Chart 4.
Private dwelling approvals

0.4 '000
smoothed
Housing construction
'000 18 16 14 100 80 60 40 20 12 0 -20 -40 % ann
New dwelling investment Approvals, adv 2 qtrs
Latest based on 3mths to July
% ann
100 80 60 40 20 0 -20 -40
Tas (lhs)
Aust (rhs)
-14% 6mths to Jul
0.3
0.2
0.1
10 8 Jul-95 Jul-99 Jul-03 Jul-07 Jul-11
0.0 Jul-91
-60 Jun-90
-60 Jun-02 Jun-06 Jun-10
Jun-94
Jun-98
Chart 5.
Chart 6.
Business investment, levelling out

0.7 0.6
Equipment *
Basslink
Non-residential construction
$bn 0.7 0.6 0.4 $bn Non res. building Infrastructure
Work done Work done
$bn
$bn
1.2
0.5 0.4 0.3 0.2 0.1 0.0 Jun-91

* including computer software etc
0.5 0.4
0.3
Yet to be done Commencements *

* 2qtr avg
Yet to be done Approvals *

* 2qtr avg
0.9
0.2 0.3 0.2 0.1 0.0 0.1
0.6
0.3
Jun-96
Sep-01
Sep-06
Sep-11
0.0 Jun-89
0.0 Jun-97 Jun-05 Jun-89 Jun-97 Jun-05
23
Westpac market outlook September 2011
Summary indicators
Chart 1. Chart 2.
Gross State Product

% Tas SA WA Qld Vic NSW 0 20
2 6 15 20 23 31 54.6 54.8 56.6
Population
$'000 8 7 6
81.2 5.6
mn
7.3
2009/10
46.2 49.2
GSP per capita

Aust: 58.0
Shares
5 4 3 2 1 0 NSW Vic
Australia: 22.5 million

4.5 Dec 2010
2.3 1.7 0.5 0.4 0.2
40 40
90
Qld
WA
SA
Tas
ACT
NT
Chart 3.
Chart 4.
Business investment in 2010

40 $bn
Exports of goods & services

% %
Share of national exports
4 12 22 24 34 2009/10 16 14 12 16
Tas SA Vic NSW
30
Non construction Construction
Share of state GSP
20
Aust = 23%
10
Qld WA
28 54
0 NSW Vic Qld WA SA Tas NT ACT
10
20
30
40
10
20
30
40
50
60
Industry mix
Australia Agriculture Mining Manufacturing Construction Transport, utilities Wholesale, retail Health, social assistance Household services Finance Business services Public administration 2.5 11.0 10.0 8.2 7.9 10.1 6.6 9.8 11.9 16.3 5.6 NSW 1.5 4.2 10.3 7.0 8.0 10.1 6.2 10.6 17.6 19.3 5.2 Vic 2.6 2.4 12.3 7.2 7.5 12.2 7.2 10.7 14.6 19.3 3.8 Qld 2.7 16.5 9.1 9.1 8.8 10.6 6.9 9.8 7.5 13.0 5.9 WA 2.7 33.8 7.0 10.9 6.9 7.3 4.8 6.3 4.8 12.3 3.2 SA 4.9 4.1 13.8 7.8 8.7 10.5 8.8 10.9 9.9 14.4 6.2 Tas 7.9 2.3 13.4 6.6 10.5 9.6 10.6 11.4 10.3 9.7 7.6 NT 2.8 28.3 6.7 9.8 7.5 5.0 6.4 9.0 4.4 9.2 10.8 ACT 0.1 0.1 1.3 10.2 4.6 5.8 6.6 11.3 6.1 16.2 37.7
Sources: ABS, Westpac Economics. For the 2009/10 financial year. Share of gross value added, excluding ownership of dwellings.
24
Notes
25
Westpac Coast-to-Coast March 2011
Notes
26
Corporate directory
Westpac Economics Sydney Level 2, 275 Kent Street Sydney NSW 2000 Telephone (612) 8254 8372 Facsimile (612) 8254 6934 Bill Evans Chief Economist Global Head of Economics & Research Andrew Hanlan Senior Economist Matthew Hassan Senior Economist Huw McKay Senior International Economist Justin Smirk Senior Economist Elliot Clarke Economist Auckland Takutai on the Square Level 8, 16 Takutai Square Auckland, New Zealand Telephone (649) 336 5671 Facsimile (649) 336 5672 Dominick Stephens Chief Economist, New Zealand Anne Boniface Senior Economist Michael Gordon Senior Economist Felix Delbrck Senior Economist London Camomile Court, 23 Camomile St, London EC3A 7LL United Kingdom Telephone (4420) 7621 7061 Facsimile (4420) 7621 7527 James Shugg Senior Economist Financial markets Australia Sydney Level 2, 275 Kent Street Sydney NSW 2000 Telephone (612) 8254 9470 Facsimile (612) 8254 6933 Melbourne Level 9, 360 Collins Street Melbourne VIC 3000 Telephone (613) 9602 1900 Facsimile (613) 9602 1760 Brisbane Level 14, 260 Queen Street Brisbane QLD 4000 Telephone (617) 3227 2100 Facsimile (617) 3227 2055 Adelaide Level 19, 91 King William Street Adelaide, SA 5000 Telephone (618) 8230 2119 Facsimile (618) 8230 2137 Perth Level 16, 109 St Georges Terrace Perth WA 6000 Telephone (618) 9426 2522 Facsimile (618) 9426 2261 New Zealand Financial markets New Zealand Auckland Takutai on the Square Level 8, 16 Takutai Square Auckland, New Zealand Telephone (649) 336 5671 Facsimile (649) 336 5672 International London Camomile Court, 23 Camomile St, London EC3A 7LL England Telephone (44-20) 7621 7670 Facsimile (44-20) 7621 7512 New York Level 39, 575 Fifth Avenue New York NY 100172422 USA Telephone (1-212) 551 1820 Facsimile (1-212) 551 1997 Hong Kong 23/F Entertainment Building 30 Queens Road Central, Hong Kong Telephone (85-2) 2842 9888 Facsimile (85-2) 2840 0591 Peoples Republic of China Room 701, 708, Jin Mao Tower No 88 Century Avenue Pudong, P.R. China 200121 Telephone (8621) 6165 7688 Facsimile (8621) 5047 5008 Singapore 77 Robinson Road #1901, Robinson 77 Singapore 068896 Telephone (65) 6530 9898 Facsimile (65) 6532 6781 Port Moresby Level 9, Deloitte Towers Douglas Street Port Moresby PNG Telephone (67-5) 322 0888 Facsimile (67-5) 322 0841 Fiji Islands Westpac House 73 Gordon Street Suva, Fiji Islands Telephone: (679) 330 0666 Facsimile: (679) 330 0718
This issue was finalised on 23 September 2011 Publication enquiries, Westpac Economics, Telephone (61-2) 8254 8720, economics@westpac.com.au
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Westpac Coast-to-Coast: September 2011

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Westpac Coast-to-Coast

An update on Australia's state economies

This issue was finalised on 23 September 2011

Westpac Coast-to-Coast September 2011

The Australian economy

Westpac Coast-to-Coast September 2011

The Australian economy

Australia: economic outlook

Australia: the domestic growth mix

-2 consumer housing business public demand

Household savings rate climbs

Australia: household demand to soften

-6 Jun-91 Jun-95 Jun-99 Jun-03 Jun-07 Jun-11

-3 Jun-91 Jun-95 Jun-99 Jun-03 Jun-07 Jun-11

Jobs market cools, unemployment rises

Mining investment booming

Westpac Coast-to-Coast September 2011

State overview: emerging divide

Jun-11 yr 5.7 5.5

5.2 4.4 4.2 3.4 2.7 1.5

0 Tas NSW Vic SA Aus Qld WA

Sources: ABS, Westpac Economics

-2 Jun-95 Jun-01 Jun-07

NSW + Vic WA + Qld

NSW + Vic WA + Qld

Westpac Coast-to-Coast September 2011

State overview: emerging divide

Consumer spend: shifting trends

Jobs market correction

Sources: ABS, Westpac Economics

Dwelling approvals, private

Established house prices soften

50 Jul-09 Jul-05 Jul-09

-20 Jun-07 Jun-99 Jun-07

Population growth moderates

Non-residential construction pipeline

Sources: ABS, Westpac Economics

Work Yet to be Done South-east Qld, WA, NT

Westpac Coast-to-Coast September 2011

New dwelling construction

200 180 160 140 120 100 80 60

200 180 160 140 120 100 80 60

Sources: ABS, Westpac Economics

Business equipment investment

Business construction investment

NSW Vic Tas

330 280 230

Public investment, general government

Exports uptrend, hit by weather disruptions

200 160 120 80 40 Dec-02

Westpac Coast-to-Coast September 2011

House prices sliding everywhere except Sydney

Auction clearance rates barely at 50%

0 Sep-88 Sep-91 Sep-94 Sep-97 Sep-00 Sep-03 Sep-06 Sep-09

Sentiment on time to buy perks up

Housing affordability not overly stretched

40 Sep-08 Sep-09 Sep-10 Sep-11 Sep-08 Sep-09 Sep-10 Sep-11

Source: Melbourne Institute, Westpac Economics

Rental mkts: Melb loosening; Bris, Perth tighter

Dwelling approvals: softening across the board

200 180 160 140 120 100 80

smoothed, Dec 2005 = 100 figures in brackets show %total