On 1 June 2023 the Australian Bureau of Statistics (ABS) published the March quarter 2023 Australian National Accounts: National Income, Expenditure and Product (Cat. No. 5206), which means we can update the Practical Economics quarterly Australian state and territory Gross State Product (GSP) series.
The ABS publishes quarterly Gross Domestic Product (GDP) in Cat. No. 5206, and annual GSP in Australian National Accounts: State Accounts (Cat No. 5220.0), but does not publish quarterly state and territory GSP.
The Practical Economics quarterly GSP method involves benchmarking quarterly industry indicators to annual GSP data. For a full description of the method see here and in the Technical Paper that can be downloaded here.
At this stage our quarterly industry indicators are national quarterly industry value-added data, which are benchmarked to annual state and territory GSP.
These are experimental data and we encourage you to read our disclaimers here and here.
Table 1 below shows quarterly GSP growth for the March quarter 2023. All states and territories experienced strong economic growth in the March quarter 2023 and year to the March quarter (March quarter 2023 relative to the March quarter 2022).
In particular, the Victorian economy is showing signs of life, although as we will see below it is not back to where it could have been had the COVID-19 lockdowns not occurred.
Table 1: March Quarter 2023 Practical Economics Gross State Product, Percentage Changes, Chain Volume Data
| State | Quarterly Growth Dec-22 to Mar-23 | Year-on-year Growth Mar-22 to Mar-23 |
| NSW | 0.20 | 2.25 |
| VIC | 1.22 | 2.10 |
| QLD | 0.52 | 2.46 |
| SA | 0.65 | 1.95 |
| WA | 0.22 | 3.46 |
| TAS | 1.00 | 1.79 |
| NT | 1.25 | 3.26 |
| ACT | 0.68 | 3.38 |
| AUS | 0.56 | 2.47 |
The growth in the sum of states and territories GSP series in the March quarter 2023 was 0.56%, compared to 0.23% for the ABS GDP figure for the same quarter. This difference is due to the seasonal adjustment performed on the data and difficulty in scaling chain volume (constant price) data consistently over time.
Practical Economics applies the X13 seasonal adjustment technique to data from September 2002 to March 2023. The ABS applies a different (X12) seasonal-adjustment technique to its data, and:
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- Applies the technique to a longer series, which starts from September 1959;
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- In response to the large economic swings in response to the COVID-19 lockdowns, since March 2020 has applied forward (seasonal-adjustment) factors (calculated prior to March 2020) to adjust the data, rather than calculate factors over the entire data sample.
Seasonal adjustment requires a deeper dive than we have time for here, in fact we might do a future post on it.
For now, we are reminded why our old econometrics lecturer told us to always ask for original data, and do any seasonal modelling (e.g. with dummy variables) yourself.
Additionally, we cannot scale chain volume QGSP data so that the sum of the states quarterly GSP equals GDP, as historical chain volume data are not additive. We might try another loop or two in the code for the next update to see if we can alleviate this problem a little.
National economic output (GDP) has recovered to its potential level, meaning the national output gap, or GDP in the March quarter 2023 relative to what it would have been had the linear trend from the September quarter 2015 to the December quarter 2019 continued, is virtually zero.
However, the national output gap masks substantial differences in performance of the different states and territories, as shown in Table 2 below.
Table 2: Output Gap, Australian States and Territories, March Quarter 2023, Percentage Points, Positive value indicates output below potential
| Output Gap (percentage points) | |
| NSW | 1.59 |
| VIC | 3.29 |
| QLD | -0.7 |
| SA | -5.6 |
| WA | -5.95 |
| TAS | -1.99 |
| NT | -4.09 |
| ACT | 2.28 |
| AUS | -0.16 |
New South Wales and Victoria remain the laggards in terms of GSP recovery from the COVID-19 lockdowns, with the smaller states and territories roaring ahead.
The next update to our series will come from the ABS National Income, Expenditure and Product release on 6 September 2023, which will include national industry data for the June quarter 2023.
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