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 Northern Territory’s (NT) economic outlook, as published in the Department of Treasury and Finance’s Mid-Year Report in November 2019.
- All economies are subject to cyclical effects, with frequency, magnitude and length of time between periods of growth often linked to the size of the economy, structure and reliance on key industries, and vulnerability to external factors.
- NT is a small open economy heavily reliant on resources and historically driven by major projects, making economic cycles more pronounced than in other jurisdictions in Australia. Over the last 25 years, the NT has experienced growth cycles averaging six to seven years where expansionary economic conditions have been experienced.
- The NT is currently transitioning through a downturn in the economic cycle, which is reflected in declines across a number of key economic indicators. The NT’s gross state product (GSP), employment, population and consumer price index collectively provide an overview of the cyclical nature of the economy (Chart 1).
- NT has a highly transient population that is sensitive to these movements, as economic and particularly employment conditions influence people to come to or leave the NT. Hence, population growth is generally in line with growth in the NT’s state final demand (SFD).
- The recent period of economic expansion, which peaked in 2012-13, was driven by the Ichthys liquefied natural gas (LNG) project, which had an unprecedented effect on the NT economy and will continue to provide a positive contribution for the duration of the 40-year operational life of the project, largely through exports of LNG, ongoing maintenance activities including major shutdowns and potential future investment.
Gross state product
- The NT’s economic growth over the forecast period continues to reflect a transition from record levels of private investment, towards export‑driven growth.
- The NT’s headline economic activity declined by 1.5% in 2018-19 to a total GSP of $26.1 billion.
- The NT recorded the only decline of all jurisdictions, while Tasmania recorded the highest increase (3.6%). Nationally, gross domestic product increased by 1.9%.
- Growth in 2019-20 will be mainly reflective of growth in exports, and the other sectors of the economy will either contract or report modest growth over the same period (Chart 2).
- Economic growth in the outer years (2021-22 and 2022-23) is expected to average 2.7% as the effect of the completion of construction at the Ichthys LNG project and commencement of exports washes through, no longer contributing to fluctuations in economic growth.
- Growth in 2021-22 and 2022-23 is also expected to reflect improvements in household consumption, public investment and initial levels of exploration activity associated with onshore unconventional gas.
State final demand
- The change in the domestic economy over the forecast period, as measured by SFD, reflects the NT’s economic transition from private investment to domestic consumption. As a result, SFD is expected to continue to contract over the next year as, unlike GSP growth, it will not benefit from the boost in exports.
- SFD is expected to decline by 1.7% in 2019‑20, largely reflecting the declines in business investment.
- Underlying public investment is expected to provide some offsetting support to SFD, however not at a level sufficient to fully offset the scale of the decline in private investment.
- SFD is expected to return to growth of 0.3% in 2020‑21, before strengthening to 2.4% and 2.2% in 2021‑22 and 2022-23, respectively, as household consumption strengthens, albeit below trend levels over the medium term, and private investment resets to a long-term trend (Chart 3).
- The NT’s population decreased by 0.4%, to 245,562 through the year to the March quarter 2019. A decline is expected to continue into 2018-19, with the NT’s population estimated to fall by 0.7% due to further expected net interstate migration (NIM) outflows over the year.
- Net overseas migration and natural increase are both expected to make weaker positive contributions to the NT’s population.
- The NT’s population is expected to improve in the outer forecast period, returning to growth from 2020-21, but remain well below the long-term average growth rate over the coming years (Chart 4).
- Following the declines across 2017-18 and 2018-19, employment is expected to decline by a further 2.0% in 2019-20, reflecting subdued economic conditions across the NT (Chart 5).
- Over the later years of the outlook period, employment is expected to return to growth, albeit at below trend levels.
- From 2019-20 onwards, a large portion of workers who became unemployed and are unsuccessful in securing other employment are expected to move interstate for other employment opportunities or return to their usual place of residence.
- This is expected to offset the effect of low employment growth and result in the unemployment rate falling slowly but steadily over the forecast period, dropping to 4.4% by 2022-23 (Chart 5). However, this is still above the NT’s long-term average unemployment rate.
Consumer price index
- Growth in the Darwin CPI is anticipated to strengthen slightly compared to 2018-19, but continue to be modest without any strong inflation drivers (Chart 6).
Wage price index
- Growth in wage price index is expected to moderate to 1.5% in 2019-20.
- Wage growth is forecast to increase from 2021-22 but remain below long‑term trends, consistent with national trends and demand for labour (Chart 6).