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 2021-22 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 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 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 4.7% in 2019-20, driven by a decline in private investment. This followed a decline in SFD of 17.2% in 2018-19, again driven by a decline in private investment following completion of the Ichthys LNG project construction phase.
- SFD is forecast to return to growth of 4.2% in 2020‑21 (Chart 2), with household consumption the major contributor to growth, followed by private investment.
- Household consumption is estimated to return to growth in 2020‑21 (the first increase in two years) and will be supported by the Territory’s effective health response to COVID‑19 and the minimal trading restrictions that resulted, as well as the Commonwealth’s JobKeeper and JobSeeker payments, the early release of superannuation, and a limited ability to travel.
- Private investment is estimated to return to growth of 9.6% in 2020-21 (the first increase in three years) as business confidence improves, and is also supported by various housing investment schemes (such as the Territory’s Home Improvement Scheme and BuildBonus grant, and the Commonwealth’s HomeBuilder grant).
- Over the medium term, private investment will be influenced by the Barossa Project, global demand for Territory resources, the Territory’s cost competitiveness in producing resources and the risk appetite of investors.
- Public investment is forecast to average $1.6 billion per annum over 2020‑21 to 2024‑25 and will provide significant support to the Territory economy and jobs.
- The NT’s population is estimated to have stabilised 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 0.3% 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 2024-25 is estimated to be around 8,700 people (Chart 3), increasing on average by 0.7% per annum.
- Employment declined by 0.6% in 2019-20 after showing some signs of recovery before the severe impact of COVID‑19 in the June quarter.
- The Territory’s success in managing COVID‑19 and avoiding extended periods of trading and movement restrictions has reduced the impact of the pandemic on employment, which is expected to decline by a further 0.6% in 2020‑21 (Chart 4).
- Employment is forecast to return to growth of 1.8% in 2021‑22 and remain positive over the outlook period, supported largely by the recovery in investment but also by the labour‑intensive tourism sector as international travel and interstate border restrictions are lifted, and demand returns for these jobs.
- The NT’s unemployment rate averaged 5.6% in 2019-20.
- 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 remain at around 5.6% 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 as a result of various government policies in response to COVID‑19.
- Growth in the Darwin CPI is forecast to rebound in the short term as these impacts are unwound, and then strengthen over the outlook period but still remain below long term averages (Chart 5).
Wage price index
- Growth in the NT’s wage price index is expected to moderate to 1.7% in 2020-21 (Chart 5).
- Public sector wage growth over the outlook period will be influenced by new enterprise agreements currently being negotiated, with the Territory Government’s new wage policy to apply for four years from 2021-22. Private sector wage growth is expected to gradually increase in line with general economic conditions, and will be supported by limited access to international labour due to border restrictions.