Economic growth | State final demand | Household consumption | Public consumption | Private investment | Public investment | Net exports | Explanatory notes
Over the last 15 years the Northern Territory (NT) economy has experienced an ongoing pipeline of major project investments by both the public and private sectors, stimulating the expansion of the NT economy and exports (Chart 1). The NT Government’s Economic Development Framework leverages existing strengths of the NT economy, unique culture and resources and our location as the gateway between Asia and Australia to continue the development and diversification of the NT economy, and encourage new investment and growth opportunities in the future.
The NT economy grew by 4.0% to $25.4 billion in 2016-17, an improvement from 1.9% growth in 2015‑16. The NT recorded the second highest growth rate of jurisdictions behind the Australian Capital Territory (Chart 2).
Growth in the NT economy for 2016‑17 was primarily driven by private investment (up 23.9%), household consumption (1.4%) and public investment (up 8.5%). Net exports was the main detractor from economic growth in 2016-17, which declined by 58.6%, reflecting a 61.3% decrease in net goods (34.1% increase in goods imports and a 4.6% decline in goods exports). The reduction in the trade balance is mainly driven by significant levels of imports of equipment for major projects, which are reflected as expenditure on a balance of payments basis in 2016‑17 (Chart 3).
In terms of expenditure, economic growth in 2016-17 was underpinned by a significant increase in private business investment, largely driven by activity relating to the Ichthys liquefied natural gas (LNG) project and the commencement of construction for the Northern Gas Pipeline.
The NT’s gross state product (GSP) per capita also strengthened, up 3.7% to $103,763 in 2016-17, from an increase of 1.4% in the previous year and above the national gross domestic product per capita growth rate of 0.4%. The higher level of GSP per capita in the NT largely reflects the capital‑intensive nature of investment activity in the NT.
The NT economy continues to be influenced by the timing of the largest project in the NT’s history, the US$34 billion Ichthys LNG project, particularly the transition from the project’s construction and commissioning phase to the operational and export phase. Over the five years from 2012‑13, it is estimated there was an average $4.0 billion per annum of additional investment, equivalent to almost 20 per cent of total GSP. This scale of investment is unprecedented in the NT’s history and has had a substantial impact on the NT’s economic indicators.
In 2017-18, the NT’s state final demand (SFD) decreased by 2.8% to $29.1 billion, in year on year terms (original terms). This was the only recorded decline in SFD across all jurisdictions and was below the national level of 3.5%. However, the NT’s SFD result remains above the 10-year average ($27.0 billion).
A decline in investment was the primary driver for the weak SFD result, falling by 13.2% in the year, with private investment being the main detractor (down 14.8%). This was partly offset by growth in consumption (up 3.6%) with public consumption and household consumption increasing by 6.3% and 1.9%, respectively (Chart 4).
SFD does not distinguish between demand met by goods and services produced within the NT, or by goods sourced from interstate or overseas. Therefore, SFD is not a full measure of the economy, nor can it be used as a proxy for GSP.
In the June quarter 2018, the NT’s SFD decreased by 2.3% to $7 billion, mainly driven by falling private investment which declined by 12.7% in the quarter (seasonally adjusted terms). The NT recorded the weakest quarterly result of the jurisdictions, which ranged from a 0.1% increase in Western Australia to a 1.8% increase in the Australian Capital Territory. Nationally, SFD increased by 0.6% to $454 million in the quarter.
Household consumption (otherwise classified as private consumption) measures a state or territory’s expenditure across key goods and services. These have been categorised by the Australian Bureau of Statistics (ABS) according to purpose or function.
In 2017-18, household consumption increased by 1.9% to $11.4 billion (contributing 0.7 percentage points to SFD). The main household categories which contributed to this increase included additional spending on hotels, cafes and restaurants (0.24 percentage points), recreation and culture (0.23 percentage points), and miscellaneous goods and services (0.15 percentage points).
In contrast, the main household category which declined in 2017-18 was net interstate expenditure (down 0.39 percentage points) (Chart 5). Net interstate expenditure captures the net result of expenditure entering and exiting the NT, to and from other jurisdictions in Australia.
Public consumption was the main contributor to the NT’s total consumption growth (1.5 percentage points), increasing by 6.3% to $7.8 billion in 2017-18. This was driven by increases in both state and local consumption (up 7.7%, a 1.1 percentage point contribution to SFD), and national consumption (up 4.1%, a 0.4 percentage point contribution to SFD). Public consumption remains heavily influenced by current NT Government budget constraints which is expected to contract further in 2018-19.
In 2017-18, private investment declined by 14.8% to $8.5 billion, largely due to falling business investment, as a result of the completion of the investment and construction phase of the Ichthys LNG project. Investment on dwellings and ownership transfer costs also contributed to the decline in total private investment.
Despite this decline, weak private investment will be softened by smaller-scale projects over the forecast period, such as the completion of the Northern Gas Pipeline, Darwin Port redevelopment works, rural agriculture developments, construction of the Darwin luxury hotel, and the new Darwin Business Park subdivision at East Arm.
Business investment in the NT was the main contributor to the negative result for total investment in 2017-18, with the category declining by 15.6% to $7.7 billion. The main drivers were total non-dwelling construction (down 17.7%), and intellectual property products (down 24.6%), partly offset by growth in cultivated biological resources (up 6.1%), and total machinery and equipment (mainly new machinery and equipment) (up 8.7%) (Chart 6). The decline follows a 30.9% increase in business investment in 2016-17.
In 2017-18, dwelling investment continued a downward trend which has been declining since March 2015, dropping to $607 million (down 6.0%). This is the result of new and used dwelling investment which declined by 13.7% in the year, recording its lowest level since the 2013-14 peak, when high levels of residential unit construction along with strong growth in new house construction were recorded (Chart 7). However, alterations and additions increased by 3.5% to $292 million over the same period.
The increased dwelling supply over recent years and moderating population growth has also placed downward pressure on property prices and rents. For more information, refer to the Housing page.
Ownership transfer costs also contributed to the NT’s lower investment result, declining by 6.6% to $199 million in 2017-18.
Public investment in the NT also contracted in 2017-18, declining by 2.0% to $1.4 billion, from an 8.5% increase experienced in 2016-17. This was driven by lower investment by both public corporations (down 4.1%) and general government (down 1.5%).
The decline in public corporations was the result of lower investment from both Commonwealth corporations (down 4.5%) and state and local corporations (down 3.5%), with investment by Commonwealth corporations declining for the first time since 2014-15. The decline in general government investment was driven by state and local investment (down 2.8%), partly offset by an increase in national investment (up 3.4%).
The Australian Bureau of Statistics (ABS) statistical treatment of state and local public investment is not comparable to NT Government expenditure published in the Budget Papers, however provides a representation of public investment relative to GSP.
For more information, refer to the NT Government's finance papers.
Net exports of goods and services decreased by 58.6% to $865 million in 2016-17, reflecting a significant increase in total imports of 26.1% to $4.8 billion, likely relating to major project activity. Furthermore, NT total exports fell 3.9% to $5.7 billion in 2016-17, mainly related to lower export volumes of resources and commodities.
Net exports of goods significantly declined by 61.3%, driven by a 4.6% decrease in goods exports to $4.9 billion, and a 34.1% increase in goods imports to $4.1 billion in 2016-17.
In terms of services, the NT experienced a 0.9% increase in service exports to $748 million, while over the same period imports of services to the NT decreased by 6.6% to $692 million. The contribution of service exports to the NT economy may seem relatively small in comparison to the value of goods exports ($4.9 billion in 2016-17), however service exports make a substantial contribution to diversification of the NT economy and employment.
The latest monthly data published by the ABS within the ‘International Trade in Goods and Services’ release, shows that the NT’s total balance of goods traded increased by 9.5% to $3.7 billion in the year to July 2018. The year-on-year result largely reflects growth in the value of goods exports by $692 million (13.9%) to $5.7 billion, slightly offset by growth in the value of goods imports by $381 million (23.0%) to $2.0 billion.
For more information, go to refer to the International Trade page.
GSP represents the value of economic output in a state or territory’s economy and is published annually on the ABS website. GSP is calculated using three measures: income, production and expenditure. Headline GSP represents an average of the combined income, expenditure and production measures.
The ABS also publishes quarterly estimates of SFD, a measure of domestic economic activity. However, this does not include demand for the NT’s goods and services from overseas, net interstate trade or changes in inventories. Therefore, the annual value of net exports are provided through the GSP release, though with monthly estimates available in the separate ABS publication in ‘International Trade in Goods and Services’. For more information, refer to the International Trade page.
Caution should also be noted when comparing data currently pushed to previous publications. Historical GSP data is often revised from year to year as a result of new information available to the ABS. Given the relatively small size of the NT economy, this new information and subsequent revisions can have a significant impact on the NT’s growth rates.
For the latest available data and analysis, see the Department of Treasury and Finance’s GSP and SFD economic briefs.