Download Territory Economy

Territory Economy
The following section provides an overview of the Territory economy, including the overall
performance of the economy in 2012-13 and the outlook for 2013-14. Updates of key economic
indicators are published regularly and can be downloaded at www.treasury.nt.gov.au/economy.
Structure of the Economy
The Territory accounts for 18 per cent of Australia’s total land mass and just over 1 per cent of
Australia’s total population, with approximately one-third of the Territory’s population being
Indigenous.
The Territory has a relatively small economy, making up about 1.2 per cent of Australia’s GDP
in 2011-12. The Territory’s economic base is relatively concentrated, with large contributions
from mining, construction, government services and defence.
The small size of the Territory economy means that large, typically resource-based projects
can have a substantial impact on investment and production, resulting in volatile growth
patterns. The significance of the mining industry, as well as a relatively large tourism industry,
makes the Territory economy particularly reliant on international trade and as a result it is
susceptible to developments in key trade markets and the world economy generally.
Gross State Product
The Territory’s GSP is estimated to have increased by 4.6 per cent to $18.9 billion in 2012-13.
Growth is expected to have been underpinned by private sector investment, primarily related to
the Ichthys project and strengthening household consumption. Lower levels of public
investment and a narrowing trade surplus, associated with increased levels of machinery
imports, are expected to have partly offset growth in 2012-13.
Investment expenditure in the Territory is estimated to have increased by over 70 per cent to
$13.1 billion in 2012-13. This is due to strong growth in private sector business investment
driven by a number of major projects including the Ichthys project, the Montara oilfield
development, the Marine Supply Base, the new Darwin Correctional Precinct, and expansion
work at the McArthur River and Groote Eylandt Mining Company (GEMCO) mine sites. Growth
is also expected to have been supported by an increase in private dwelling investment,
reflecting the large number of unit developments under construction, particularly in and around
the Darwin central business district (CBD), and strong levels of house construction in new
suburbs in Darwin and Palmerston.
Public sector investment is estimated to have declined by 13.0 per cent in 2012-13, as the
Territory Government’s capital works program continues to wind down from record
counter-cyclical highs.
Total consumption expenditure in the Territory is estimated to have increased by 1.7 per cent
to $14.8 billion in 2012-13. Household consumption, which accounts for about 60 per cent of
total consumption, is expected to have increased by 3.0 per cent in 2012-13, while public
sector consumption expenditure is estimated to have decreased by 0.1 per cent, reflecting
savings measures and fiscal tightening by the Territory and Commonwealth governments.
The Territory’s economic growth rate is forecast to strengthen to 5.0 per cent in 2013-14,
driven primarily by accelerating development activity on major projects, strengthening
household consumption and continued growth in residential construction. A widening of the
Territory’s trade balance is also expected to support economic growth in the year.
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External Economic Environment
The International Monetary Fund (IMF) forecasts global economic growth to remain at
3.1 per cent in 2013, before strengthening to 3.8 per cent in 2014. Emerging economies are
expected to grow at a much faster rate than advanced economies, with Asia (including China)
expected to lead global growth.
The strength of demand from developing Asia is expected to result in the Australian economy
outperforming most other advanced economies, with the IMF forecasting economic growth for
Australia of 3.0 per cent in 2013, strengthening to 3.3 per cent in 2014. The Territory is well
positioned to capitalise on this growth.
International Trade
Overseas exports constitute over 35 per cent of Territory GSP. Major Territory exports include
liquefied natural gas (LNG), oil, mineral ores, and tourism-related services. The Territory’s
trade surplus is expected to have narrowed by $400 million to $1.4 billion in 2012-13. This
largely reflects strong growth in imports of machinery and equipment required for major
projects. The increase in imports is expected to be partly offset by an increase in exports as oil
production commences at the Montara oil field and reaches capacity at the Kitan oil field.
In 2013-14 the Territory’s trade surplus is forecast to widen, driven by a further increase in
exports mainly due to a full year of production from the Montara oilfield.
Population
The Territory’s annual population growth rate strengthened from 1.0 per cent in 2011 to
1.8 per cent in 2012. This was in line with strengthening economic activity.
The Territory’s population growth rate is forecast to strengthen further, to 2.0 per cent in 2013
and 2.5 per cent in 2014 as major projects attract labour from interstate and overseas. High
levels of construction activity and the associated increase in the direct demand for labour, as
well as higher levels of economic activity in general, are contributing to the forecast growth in
the Territory’s population.
Labour Force
Resident employment growth in the Territory strengthened to 2.4 per cent in 2012-13, mainly
reflecting strengthening demand for construction labour following the commencement of
several major projects in 2012.
In 2013-14, resident employment growth is forecast to strengthen further to 3.0 per cent as a
result of stronger economic activity associated with acceleration of work on major projects.
Defence expenditure on a central maintenance facility at Robertson Barracks and continued
work on new accommodation at defence bases are expected to support employment growth.
Prices
Growth in the Darwin CPI was relatively low in 2012, with year-on-year growth slowing to
2.0 per cent. However, Darwin CPI growth increased during 2013, with year-on-year growth
forecast to strengthen to 3.9 per cent. This primarily reflects increases in utility prices and
housing purchase and rental prices, as well as stronger aggregate demand flowing on from
major projects. In 2014, year-on-year CPI growth is forecast to moderate to 3.5 per cent,
reflecting lower growth rates for housing and utilities.
Mining and Manufacturing
In terms of output, mining is the largest industry in the Territory, accounting for nearly
20 per cent of Territory GSP in 2011-12. Manufacturing, primarily consisting of LNG and
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alumina production, is also a significant contributor to the Territory economy. In 2012-13, value
of mineral and energy production in the Territory is estimated to have increased by
12.0 per cent to $6.6 billion, primarily due to higher levels of oil production. Manufacturing is
estimated to have increased by 7.7 per cent to $2.6 billion, mainly driven by LNG production
returning to normal levels following a scheduled maintenance shutdown of the Darwin LNG
plant in May and June 2012.
In 2013-14, the value of mining and energy production is forecast to increase by 15.3 per cent
to $7.6 billion, reflecting higher oil production and the expansions of the McArthur River
zinc/lead mine and GEMCO manganese operations.
Construction
The construction industry accounted for 11.6 per cent of Territory GSP in 2011-12 and, in
terms of output, was the second largest industry in the Territory behind mining. The
construction industry also accounts for about 10 per cent of the Territory’s resident labour
force. Construction activity in the Territory is estimated to have increased by 62.5 per cent to
$5.0 billion in 2012-13, primarily driven by engineering construction associated with the
preliminary stages of the Ichthys project and the development of the Montara oilfield.
In 2013-14, the value of construction activity in the Territory is forecast to increase by
17.4 per cent to $5.8 billion as work on the Ichthys project accelerates and the McArthur River
and GEMCO mine expansions conclude.
Residential construction is also expected to support growth in 2013-14, with a number of unit
developments in and around Darwin CBD, as well as strong levels of house construction
primarily in the new Darwin and Palmerston suburbs of Muirhead, Bellamack, Johnston and
Zuccoli. Other projects such as the construction of the Charles Darwin Centre in the Smith
Street Mall, the Darwin International Airport terminal expansion and the first stages of the
Berrimah Business Park are expected to contribute to growth in 2013-14.
Tourism
Total visitor arrivals to the Territory increased by 5.2 per cent in 2012. Domestic visitation
increased by nearly 10.6 per cent in 2012, the first year-on-year increase since 2007, with
growth across all tourism categories. However, overseas visitor arrivals continued to decline in
2012, down by 12.2 per cent, to 254 000. The decline was driven by a fall in holiday visitors,
likely due to the ongoing effects of a high Australian dollar and ongoing economic weakness in
a number of key source markets, including the United Kingdom.
Nationally, the number of international visitor arrivals increased, driven by strong growth in
holiday visitors from China. However, they did not arrive in the Territory in sufficient numbers to
influence total visitor arrivals. The recent depreciation of the Australian dollar may help to make
the Territory a more affordable destination for international tourists in 2013 and beyond.
Increased economic activity in the Territory, and particularly in the Darwin region, is expected
to produce strong results in the accommodation sector in 2013 due to increased business
visitation. However, this may reduce the affordability and availability of accommodation for
holiday visitors to the Territory.
Longer Term Economic Outlook
The longer term economic outlook is for Territory economic growth to continue to accelerate
through to 2014-15, when growth is forecast to peak at 7.0 per cent, before moderating to
4.5 per cent in 2015-16 and 3.9 per cent in 2016-17.
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Growth through to 2014-15 will be underpinned by record levels of private investment as work
on the Ichthys project reaches peak levels, as well as strong new housing construction,
particularly in the greater Darwin region. While construction activity is expected to moderate
once the construction phase of the Ichthys project begins to wind down, it is expected to
remain at historically elevated levels in 2015-16 before returning to around long-term trend
levels in 2016-17.
Strengthening household consumption is also forecast to contribute to economic growth
through to 2016-17, driven by population and employment growth. Declining public sector
consumption is expected to partially offset growth, reflecting lower levels of Territory and
Commonwealth government consumption expenditure associated with tightening fiscal
measures aimed at reducing budget deficits.
Net exports are expected to be a major contributor to economic growth from 2015-16 onwards,
primarily due to a significant reduction in the imported components required for the
construction phase of the Ichthys project in 2015-16, followed in 2016-17 by a large increase in
exports as production of LNG from the newly constructed Ichthys project commences.
Despite moderating from a peak 7.0 per cent in 2014-15 to 3.9 per cent in 2016-17, Territory
economic growth is expected to remain above its long term historical average level and
outpace growth in the national economy.
McArthur River lead/zinc mine
Photograph provided by Dennis Schulz
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