Posted: 28 Apr. 2020 5 min. read

State of play

Weekly economic briefing

Last week Australia received its first official glimpse into the health of the labour market since the majority of lockdown restrictions were imposed.

Across the country, jobs have been slashed, with the number of people receiving payments from an employer falling 6% between the second week of March and the first week of April. The damage was seen across all states and territories, with falls ranging from 4.8% in the Northern Territory to 7.3% in Tasmania. 

Source: Australian Bureau of Statistics, Weekly Payroll Jobs and Wages in Australia

 

In reality, the nature of this virus makes it nigh-impossible for the states and territories to avoid an economic downturn. The social restrictions imposed to stifle the spread of this virus are necessary, and the economic hit from them is unavoidable.

That said, the extent to which states are impacted can vary. In general, state economies are more at risk if they have:

  • An above average number of cases, bigger populations and denser city scapes, an older or more indigenous population, or a greater concentration of workers in at risk occupations and industries.

And their economies are less at risk if they have:

  • Cut social movements by more (short term pain, longer term gain), have a bigger stimulus response, or a greater ability to sell industrial inputs to world markets.

With that lens, here are some of the themes we expect to play out across state and territory economies as they move to gradually unwind restrictions:

  • Sydney is our largest, most crowded and most international city. With international students and tourists absent, two of the most important pillars of New South Wales’ economy are at a standstill. NSW also has more of its economy in hard hit occupations and industries. As a result, its economy remains relatively more at risk than the average.
  • Victoria has lost its primary growth driver, with rapid population growth contributing a remarkable 2.2 percentage points to the state’s expansion last year. Arrivals from overseas were the largest source of that growth, but that’s now evaporated. While the lockdown in Victoria has been stricter than elsewhere (bringing with it more immediate economic pain), those tougher restrictions may well allow the state to bounce back sooner than elsewhere.
  • Queensland is Australia’s least urbanised state, it has rolled out above average stimulus, it has relatively fewer confirmed cases per capita, and it can keep selling its gas and other resources to the world. That doesn’t stop the economic pain, but it does limit its size. That said, investment spending remains a weak spot, with business being cautious amid current uncertainties.
  • Western Australia’s economy was still weak when the virus hit. The good news is the state sells industrial inputs to Asia – and Asia is expected to be relatively less impacted on the global economic front than elsewhere. The bad news is that WA depends more than any other state on business spending. And although mining capex may hold up better than most, a number of projects will likely be delayed or mothballed amid present uncertainties, blowing away what had been a nascent recovery.
  • Tasmania and South Australia are both particularly vulnerable to this health crisis given their older populations and poorer health outcomes generally. But both states reacted swiftly in restricting movements and announcing big spending initiatives. Added to that, both states have large public sectors which provide a floor to job losses. That said, last week’s job figures show a significant weakness in the ability of Tasmania’s private sector to weather the storm.
  • The Northern Territory’s domestic economy was already weak. But a lot of people in insecure work had already left, while a large public sector (employing more than a quarter of the workforce) limits the rise in unemployment. Demand for LNG exports will fall, but they won’t halt completely, which will help too. In fact it should help enough to mean the NT’s economy will shrink less than that of any other state or territory in 2020.
  • As was true for the ACT in recessions past, Canberra is a relative safe haven in a crisis. Its public sector is getting bigger as it helps battle the virus. Its population is a little younger than the national average. And the ‘garden city’ concept that underpinned Canberra’s development means that its population density is less dangerous than it looks.

 

 

More about the authors

David Rumbens

David Rumbens

Partner, Deloitte Access Economics

David is a macro economist with extensive experience in applied economic and quantitative analysis of the Australian economy, along with considerable experience in labor market analysis.  David is a regular commentator on macroeconomic trends, and prepares a weekly economic briefing newsletter.

Harry Murphy Cruise

Harry Murphy Cruise

Senior Economist

Harry joined Deloitte Access Economics in January 2017 after completing a Bachelors of Arts and Commerce, with honours in Econometrics and Business Statistics from Monash University. Harry’s area of focus is data analytics and econometric modelling, having conducted a range of research surrounding mental health, prescription drug use, labour markets and ageing populations.