The Northern Territory’s (NT) economic outlook explores a range of key economic indicators and industries, with forecasts produced for economic growth (gross state product and state final demand), population growth, employment growth, unemployment rate, prices (consumer price index) and wages (wage price index).
Economic cycle | Gross state product | State final demand | Employment growth | Unemployment rate | Population | Consumer price index | Wage price index
The following is a summary of the NT's economic outlook, as published in the 2020-21 Budget.
- All economies are subject to business cycles (fluctuations between growth and contraction), with the frequency, magnitude and length of cycles influenced by the structure of the economy, reliance on key industries and vulnerability to external factors such as commodity prices and exchange rates.
- Over the past 25 years the NT has experienced business cycles that average six to seven years, and are driven by major projects, where domestic conditions are impacted by construction and new resource exploration and production cycles.
- The NT’s employment and population generally tend to move in line with gross state product (GSP) growth, though not to the same extent. This is due to the capital‑intensive nature of investment in the NT and higher productivity per worker that results. Therefore, employment and population growth have accompanied GSP growth but without reaching the extreme highs seen in recent cycles (Chart 1).
- In the absence of major private investment projects in the short term, domestic economic growth is likely to be driven by more fundamental factors such as population growth, household consumption and confidence, public sector expenditure and small to medium‑scale private investment that relies on domestic demand or niche interstate and international trade opportunities.
Gross state product
- The NT’s headline economic activity increased by 5.3% in 2019-20 to a total GSP of $26.2 billion, reflecting an increase in goods exports, notably LNG.
- The NT’s result was the highest of the jurisdictions. Nationally, gross domestic product declined by 0.2%.
- The GSP growth outlook in the forecast period is heavily influenced by three key factors: first, the Ichthys LNG project reaching full production from 2020‑21 onwards; second, the impacts of COVID‑19 affecting a broad range of NT industries through consumer confidence, access to finance, business sentiment and investment; and third, production from Darwin LNG is not included in 2023‑24 as there has been no final investment decision made at the time of publication of these forecasts on backfill gas.
- In 2020‑21, GSP is forecast to decrease by 0.1 per cent as exports plateau, and domestic consumption and investment activity underpin economic conditions (Chart 2).
- The projections made in the economic outlook are conservative and do not factor in potential or planned projects that are yet to reach final investment decision. There are many projects on the Territory’s horizon that could proceed in the forecast period but are not currently reflected in the outlook.
State final demand
- State final demand (SFD) declined by 4.9% in 2019-20, driven by a decline in private investment (down by 20.2%). This followed a decline in SFD of 17.2% in 2018-19, again driven by a decline in private investment (down by 54.6%) following completion of the Ichthys LNG project construction phase.
- SFD is forecast to stabilise in 2020‑21 (Chart 2), as the economy continues to adjust from unprecedented levels of private investment and the transition to LNG exports.
- SFD is expected to return to modest growth of 0.5% in 2021-22, likely to be driven by more fundamental factors such as population growth, household consumption and confidence, public sector expenditure and small to medium‑scale private investment that relies on domestic demand or niche interstate and international trade opportunities.
- Private investment is expected to pick up over the outer years of the forecast period, but this will be heavily influenced by global demand for NT resources, the NT’s cost competitiveness in producing resources and the risk appetite of investors.
- The NT’s population is estimated to have declined by 0.3% in 2019-20 as interstate migration outflows continued and overseas migration declined, partly due to closure of Australia’s border.
- A return to growth of 0.2% is forecast in 2020-21, as significantly reduced migration flows result in net interstate migration having less of a negative impact.
- Natural increase is positive and is forecast to remain relatively stable in the NT, while the outlook for overseas migration is highly uncertain and will be dependent on international borders reopening and any nation-specific restrictions.
- Population growth is expected to gradually strengthen over the outlook period as the economy recovers from the negative impacts of COVID-19 and new projects support employment growth. Growth over the five years to 2023-24 is estimated to be around 5000 people (Chart 3), increasing on average by 0.4% per annum.
- Employment declined by 3.4% in 2018-19 following completion of the Ichthys LNG project construction phase, and declined by 0.7% in 2019-20 after showing some signs of recovery before the severe impact of COVID‑19 in the June quarter.
- Employment is expected to contract by a further 0.7% in 2020-21 as domestic conditions remain flat and JobKeeper ends in March 2021 (Chart 4).
- Employment is forecast to recover over the outlook period, supported by recovery in the labour‑intensive tourism sector as international travel and interstate border restrictions are lifted, and consumer and business confidence recover from the recent lows.
- Job creation will also be supported by the Commonwealth’s JobMaker hiring credit and the NT’s top up to that scheme.
- The NT’s unemployment rate averaged 5.6% in 2019-20, increasing from 4.5% in 2018-19.
- Historically, there has been a tendency for unemployed workers to leave the Territory, either returning home or seeking other opportunities interstate. However, more recently there has been a greater propensity for unemployed people to remain in the Territory due to border restrictions and less opportunities interstate as well.
- The unemployment rate is expected to top out at around 6.3% in 2020-21 before improving over the outlook period (Chart 4).
Consumer price index
- Inflation, as measured by growth in the Darwin consumer price index (CPI), has been subdued in recent years, including growth of 0.2% in 2019-20.
- Growth in the Darwin CPI is forecast to gradually strengthen over the outlook period but remain below long term averages (Chart 5).
Wage price index
- Growth in the NT’s wage price index is expected to moderate to 1.6% in 2020-21 (Chart 5).
- Public sector wage growth over the outlook period will be driven by the NT Public Sector wages policy from 2021, while private sector wage growth is expected to be tied to the economic recovery more broadly.