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 2022-23 Budget.
- Economies are subject to cycles between strengthening and contracting growth rates. The frequency, magnitude and duration of cycles are influenced by the underlying structure of the economy and the exposure of key industries to external factors that influence demand, prices and exchange rates.
- Over the past 25 years, the Territory has experienced economic cycles that averaged four years, with a range from two to seven years. These cycles have been driven by major projects, where domestic conditions are impacted by resource exploration, construction and production cycles.
- Employment and population growth broadly follow gross state product (GSP) growth, although not to the same magnitude given the capital‑intensive nature of investments in the Territory and higher productivity per worker that results (Chart 1).
- Between major private investment projects, economic conditions and growth are influenced by more fundamental factors, such as population growth; business sentiment; 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 decreased by 0.6% in 2020-21 to a total GSP of $26.2 billion, reflecting net exports being weaker than estimated, and a significantly larger balancing item (both of which had significant revisions).
- GSP is expected to return to growth in 2021‑22, with a revised forecast of 4.4%. This is 2.1 percentage points higher than the 2021-22 Budget forecast of 2.3%, and reflects higher public consumption related to government's response to COVID-19, and the confirmation of large construction projects.
- Economic growth in 2022-23 is forecast to be 3.7% as investment in large construction projects such as the Barossa project, the Finniss Lithium project and the US bulk fuel storage facility is partially offset by an associated increase in imports.
- A planned pause in production at the Darwin LNG plant in 2023-24 reflects the transition to the Barossa field as its new source of gas, and growth is forecast to decline as this detracts from net exports.
- GSP is expected to return to growth in 2024-25 and 2025-26 as Barossa comes online and exports increase, but is partially offset by weaker private investment based on projects not having reached final investment decision at the time of forecasting.
- The projections made in the economic outlook 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) increased by 6.1% in 2020-21, driven by an increase in household consumption (up by 6.6%) and an increase in private investment (up by 16.7%). This followed a decline in SFD of 5.4% in 2019-20, and highlights the significant turnaround in the domestic economy in 2020‑21.
- SFD is forecast to remain strong in 2021‑22 (8.8%) and 2022‑23 (5.4%) (Chart 2), with private investment (mainly business investment) the major contributor to growth.
- Private investment is expected to grow by 36.6% in 2021-22 and 24.3% in 2022-23, reflecting business investment associated with the Barossa projects and the Core Lithium Finniss project, for example.
- SFD is expected to decline from 2024-25 as Barossa-related investment comes to an end.
- The Territory’s population declined by 0.1% in 2020-21 to 245,900 people.
- The Territory’s population is expect to grow by 0.1% in 2021-22, growth is expected to be subdued as the easing of interstate COVID-19 restrictions allowed for interstate migration outflows and ongoing international border closures and quarantine requirements until early 2022 delayed the recovery of overseas migration.
- Population growth is expected to strengthen in 2022-23 to 0.6% and onwards as several major construction projects commence. The Territory’s population is estimated to grow on average by 0.7% per annum over the five years to 2025-26.
- Resident employment in the Territory declined by 1.7% in 2020-21, a weaker result than the 0.6% decline estimated at 2021-22Budget. Despite this weaker than expected outcome, other economic indicators suggest far healthier labour market conditions than reported by the Australian Bureau of Statistics labour force survey.
- The Territory’s labour market rebounded in 2021-22, with employment expected to increase by 1.1% (Chart 4). The return to growth reflects stronger investment, including new construction projects that have had final investment confirmed.
- From 2022-23, employment will be supported by improved population growth and the gradual resumption of international travel, notably for the labour-intensive tourism sector
- The NT’s unemployment rate averaged 5.2% in 2020-21, a better result than the 5.6% estimated at Budget.
- 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 estimated to decrease to 3.9% in 2021-22, reflecting job opportunities associated with projects contributing to employment growth (Chart 4).
Consumer price index
- After many years of subdued growth, the Darwin consumer price index (CPI), increased by 2.0% in 2020-21, stronger than estimated at Budget (0.7%) and slightly stronger than nationally over the same period (1.6%).
- The Darwin CPI estimate for 2021‑22 is expected to increase to 5.7%, reflecting the impacts of increased housing and rental prices, geopolitical tensions and the ongoing impact of disrupted supply chains in the short term (Chart 5).
- Over the medium term, growth is expected to moderate as these impacts unwind.
Wage price index
- Growth in the NT’s wage price index moderated to 1.7% in 2020-21 (Chart 5), in line with the Budget estimate.
- Territory wages are expected to grow by 1.9% in 2021-22, reflecting constrained public sector wage growth in line with the 2021-25 Northern Territory Public Sector Enterprise Agreement and the Territory Government’s wage policy generally, and gradually improving private sector wages.