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Australian State and Industry Outlook released today



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ECONTECH

Economic Consulting, Forecasting & Modelling Murphy Model 2 Software 3 I S'

Thirstens Pty Ltd ACN 056 645 197 trading as ECONTECH E-mail: anna@pcug.org.au Unit 3/10 Kennedy St, Kingston ACT 2604 Telephone: (02) 6295 0527 (from overseas: 61 2 6295 0527) P.O. Box 4129, Kingston ACT 2604____________ Facsimile: (02) 6295 8513 (from overseas: 61 2 6295 8513)

AUSTRALIAN STATE AND INDUSTRY OUTLOOK RELEASED TODAY

Econtech’s latest Australian State and Industry Outlook was released today. This report presents Econtech’s detailed forecasts for gross state product for each state and territory and for output and employment for each industry.

Econtech’s national forecasts show that, due to the Asian crisis, economic growth will be only moderate this year and the next. However, the forecasts also show that Australia is definitely not heading into an Asia-induced recession and that firm growth should resume in

2000/ 01.

The latest Treasury forecasts for 1998/99 are consistent with those published by Econtech. However, the official projections have firm growth resuming in 1999/00. In contrast, Econtech is forecasting two years of moderate growth rather than just one. Thus after rising by a high 4.1 per cent in 1997/98, GDP (A) will rise by only 2.6 per cent in 1998/99 and 2.3 per cent in 1999/00, before rebounding to growth of 3.3 per cent in 2000/01.

State Outlook

Nationally, growth in GDP (I), the GDP measure for which there is a state counterpart, is forecast to fall from a strong rate of 3.9 per cent in 1997/98 to a moderate rate of 2.6 per cent in 1998/99. However, this pattern will not apply uniformly across the states. Chart 1 compares our forecasts for 1998/99 with the outcomes for 1997/98.

0 In 1997/98 there was a wide divergence in growth between the states/territories. Western Australia was boosted by a massive jump in business investment which lifted growth to 8.4 per cent. In contrast, growth was weak in Victoria, South Australia and the NT as the Asian crisis cut back their exports.

0 In 1998/99, the distribution of growth between the states/territories will largely be reversed. For example, the strong growth in Western Australia in 1997/98 is forecast to be offset by weak growth of just 1.2 per cent in 1998/99 as investment levels moderate.

0 The three states/territories which were most affected by the Asian crisis in 1997/98 were Victoria, South Australia and the NT. These states will also be the ones to benefit most quickly from the lower exchange rate. As a result, growth in all three of these

states/territories is forecast to exceed the national rate in 1998/99. 0 Queensland and the ACT are both forecast to grow at about the same rate in 1998/99 as they did in 1997/98, albeit for different reasons. 0 In Queensland, rising levels of business and dwelling investment will offset the

slowdown in export growth caused by the Asian crisis. 0 Growth will also be stable in the ACT as government spending is projected to rise steadily after the cutbacks of recent years.

In d u stry O utlook

Nationally, growth in GDP(P), the GDP measure for which there is an industry counterpart, is forecast to fall from a strong 4.3 per cent in 1997/98 to a moderate 2.7 per cent in 1998/99. However, just as the outlook varies between states, the economic outlook will vary between industries. Our forecasts for growth for each of the 18 ANZSIC industry divisions in

1998/99 can be compared with the outcomes for 1997/98 using Chart 2.

0 Communications is forecast to remain the fastest growing industry in 1998/99 as falling prices and the take-up of new technology continue to feed growth. 0 The next fastest growing industry is forecast to be Construction. It will benefit from the tail-end of the recovery in housing investment and last minute Olympics related

construction. 0 As might be expected, the Asian crisis will cut growth most severely in the highly trade- exposed sectors of Agriculture and Mining. In 1998/99, output is forecast to fal] by

about 1 per cent in Agriculture and 3 per cent in Mining. 0 Education gross product, which fell in 1997/98 is forecast to be stable in 1998/99 and to resume rising in 1999/00. 0 Most other industries will follow the national pattern. Strong growth in 1997/98 will be

followed by moderate growth in 1998/99 and 1999/00.

Media inquiries: Justin Douglas (02) 6295 0527

Chart 1: GROSS STATE PRODUCT

% P.A.

4.7 4.7

NSW VIC OLD SA WA TAS NT

□ 1997/98

M 1998/99

3.9

ACT AUST*

* This refers to GDP(I) rather than the more widely quoted GDP (A).

Chart 2: OUTPUT GROWTH BY INDUSTRY

A. Agriculture

B. Mining

C. Manufacturing

D. Electricity, gas & water

E. Construction

F. Wholesale trade

G. Retail trade

H. Acc'n, cafes & restaurants

I. Transport

J. Communication services Sf ·...·. ··· ■ ■ ■ -■ ■ ·........... ........ . · · ....... · -..............··

K. Finance & insurance

L. Property & business services

M. Gov't admin. & defence

□ 1997-98 E 1 998-99

-1.3 CZ N. Education

O. Health & community services

P. Culture & recreation services

Q. Personal & other services

R. Ownership of dwellings

GDP(P)

annual % change