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The ACT enjoyed strong growth, particularly in private housing during the reporting period, apart from negative influences associated with introduction of the Goods and Services Tax in the first of the three-year the period. The ACT trend unemployment rate was the lowest of any state or territory for the period.
The economic base continues to lack diversity, remaining largely dependent on Commonwealth Government spending and income associated with land sales and residential development. The Draft Economic White Paper released in March 2003 acknowledged those problems and also acknowledged the interdependence between the ACT and the Local Government Authorities in NSW, particularly those adjacent to the ACT. Conflict between biodiversity conservation and economy is increasing, as land availability for development reduces.
What the results tell us about the ACT
At the start of the reporting period, along with other States, the ACT shared in a decline in economic activity during 2000–01.
In spite of exceeding growth for Australia in that 2000–01, the ACT economy was affected by a number of factors, including the lagged effect of increased interest rates during 1999–2000 and the pull-forward of investment in dwellings associated with the introduction of the Goods and Services Tax (GST).
The main factor, however, was the reduction in expenditure on goods and services by public authorities during 2000–01 (Budget Paper No. 3, 2001–02). Increase in State Final Demand in 2000–01 was 1.7% compared with a national growth in Domestic Final Demand of 0.4% (see Figure 1). In the previous year, the ACT’s State Final Demand growth had been 12%.
A good period overall
Two buoyant years followed, in which private building burgeoned as Australians experienced the lowest interest rates in 30 years, and took advantage of the Commonwealth Government's additional fillip of a $14,000 First Home Buyers' Grant to encourage home investment following the impact of GST on the construction industry.
For example, compared with the June quarter 2001, dwelling commencements (including conversions) in the ACT in June 2002 were up by 54.8%. Nationally they increased by 43.4%. (Australian Bureau of Statistics Catalogue No 8750.0).
Housing and construction soared
From 2000 to the end of 2002–03 there was a steep rise in the value of residential property turnover in the ACT (Figure 2).
Towards the end of 2002–03, while the value of ACT housing finance commitments for both owner occupation and investment continued to rise, the value of total property turnover fell, suggesting a waning in interstate investment in the local market. This is seen as consistent with a national easing in housing investment (Budget Paper No.3, 2003–04). This surge in property investment and prices had a significant impact on housing affordability.
By the end of the reporting period escalation of house prices and rising levels of household debt led to concerns over the possibility of the price bubble bursting. Interest payments as a proportion of income were at high levels despite low interest rates.
Business confidence rose
Business confidence remained high throughout the reporting period, with between 56% and 69% of small and medium businesses expressing confidence in the next twelve months. For most of the reporting period, ACT business confidence was either the highest, or among the highest, in Australia.
Consumer Price Index
The cost of goods and services (Consumer Price Index) increased by 6% in 2000–01 as a result of the GST, easing to a 3.7% increase in 2001–02 and to 2.6% in 2002–03. The increase was generally consistent with the change at the national level. In the last year from July to June, the groups to record the largest rises in the ACT in 2003 were health (+6.8%) followed by housing (+5.2%). Housing in this instance means the cost of running a house—water, electricity, gas and other fuels.
Health costs had risen 6.6% in the previous year, and 4.7% in 2000–01. The biggest increases in the first year of the reporting period were in Housing (19.8%), Food (17.7%), Transportation (15.3%) and Recreation (12.3%)—all impacts of the Goods and Services Tax.
Full-time employment hits all-time high
Employment is a significant factor in personal and household income for much of the ACT population. ACT employment figures compare well with figures for Australia. As noted in Socio-economic equity, the 2002 study of disadvantage in the ACT found that having employment is an important determinant in avoiding poverty.
Trend data for ACT employment levels in the period from June 2000 to June 2003 show a steady rise to October 2000 (at about 171,000) followed by a decline through June 2001. The previous levels were regained by June 2002 and employment rose to a peak in November 2002 (at about 175,000). From that peak, levels returned to the October 2000 level. This growth is consistent with confidence in the local labour market and other economic indicators as discussed in this indicator result. Participation rates during the reporting period were higher in the ACT than in Australia as a whole (Table 1, next page).
During the week before Census Night on 7 August 2001, 160,866 people in the ACT were employed. (This includes people who were 15 years and over but excludes defence personnel and overseas visitors.) That figure represents 94.9% of the labour force. Of these, 66.6% were working full-time (63,972 males and 43,207 females), and 31.2% were working part-time (17,734 males and 32,529 females). ‘Working full-time’ means having worked 35 hours or more in all jobs during the week prior to Census Night.
Social trends data show that, for all of the reporting period, the ACT exhibited better unemployment figures than the national figures and all states and territories, with significantly better results for the female unemployment rate. Comparison with national figures is shown in Table 2 (next page)
The proportion of unemployed people who were long-term unemployed was lower at the end of this reporting period than at the end of the previous reporting period. Long-term unemployed people constituted 16.5% and 15.7% of the total unemployed in 2001–02 and 2002–03 respectively (the only two years of the reporting period for which data were available). This was a drop from 23.5% in 1999–2000.
Little change in part-time employment
Social trends data show that in the ACT the proportion of employed people working part-time has remained relatively stable during most of the reporting period. For all part-time workers, this has been slightly below the national average.
Gender analysis, however, shows that the ACT proportion of employed males working part-time has remained higher than the national figures, while that for employed females working part-time has remained lower than the national figures (see Table 3, next page)-than-national rate for female part-time workers is perhaps associated with higher proportions of females employed full-time in the ACT.
Increase in private industry employment
Employment growth depends on the industry—retailing, personal services and construction are dependent on the size of the population and their household consumption. Government administration growth and tourism will depend on national priorities outside the ACT's population.
Growth in education employment is mostly population related but some results from international students. Health is related to population and population characteristics, but also depends on regional population and its characteristics as well.
Growth industries such as scientific research and computing services are included in business services and so subject to export-oriented growth.
The 2001 ACT Census night data showed that the strongest annual average industry employment remained with the public sector in government administration and defence, despite a reduction in its contribution to the ACT economy. Property and business services correspondingly increased in employment and contribution, followed by retail trade.Property and business services demonstrated significantly stronger growth on both five-year and ten-year trends (Table 4). Most other industry sectors experienced slight growth. However, due to a major review in industry classification by the Australian Bureau of Statistics between the 1991 and 1996 Census, Australian Bureau of Statistics notes that Census data for 1991 should be used as an indicator only.
In the following year, to May 2002 (with some different categories) these trends varied. Increases were observed in government administration and defence (+11%), retail trade (+14%), personal and other services (+30%), accommodation, cafes and restaurants (+13%); and property and business services (+3%). Declines were experienced in construction (-19%), cultural and recreational services (-21%), manufacturing (-19%), and electricity, gas and water supply (-38%). (No source noted).
The decline in construction industry employment trends is not consistent with the increase in the value of construction work done in the ACT between 2000–01 and 2002–03 as discussed above.
The ACT’s persistent economic vulnerability
Although the ACT has now been self-governing since March 1989, Government still faces a narrow revenue base with constraints on reductions in payroll tax or increased revenues from housing-based taxes and land sales (Building Canberra's Economy: A discussion paper for the Economic White Paper). As a result, Gross State Product is more volatile in the ACT than is its national equivalent, Gross Domestic Product (Figure 3).
A study of the economic boundaries of the ACT found that the real economic boundaries of the ACT are wider than its formal political boundaries. Closer cooperation on industry development activity between the ACT and NSW Governments to stimulate development within the Australian Capital Region is proposed in the Draft Economic White Paper, released in March 2003. In particular, the study found that the ACT, Queanbeyan and Yass and Yarrowlumla Shires combined could be considered as the Canberra Region Economic Area (Draft Economic White Paper, p.14). Formal arrangements between these jurisdictions could have significant consequences for development, and could influence strategic thinking behind the final shape of the ACT's Spatial Plan, part of the tripartite Canberra Plan to be completed in early 2004.
The ACT Government has recognised its sensitivity to Australian Government policies. Its Draft Economic White Paper identified options for strengthening the ACT's economic base through 'development of an industry policy framework for the ACT that will support employment and economic opportunity in the ACT Region. The final document will also form part of the tripartite Canberra Plan.
Land is still seen as the greatest revenue spinner and that resource, of course, is not finite. Based on existing land use in the Territory Plan during the reporting period there was only a limited number of years of developable land remaining in the ACT. In addition, within the last decade, the availability of land for development has also become subject to conservation considerations as residential development has occurred primarily on land supporting threatened lowland woodlands and grasslands. During the reporting period, some 62 hectares of land containing some of the highest quality endangered Yellow Box Red Gum Grassy Woodland ecological community at East O'Malley was identified for conservation purposes, while 27 hectares of that same community was sold for development.
This reporting period closed with an unexpected opportunity for Government to release new areas for residential development, subject to a range of filters. This was a result of the Christmas 2001 fires and the January 2003 bushfires, which wiped out more than two-thirds of the ACT Forests plantations. At the end of the reporting period a question mark remained over the future of the ACT plantation forestry industry as a whole, and particularly, over specific compartments that were burnt. An economic case was made during 2002 (before the massive 2003 fires) for conversion of forestry land to residential land, but the decision is not just one of economics. In terms of the value added by various industry sectors, government administration and defence continues to be the largest industry in the ACT (Figure 4).
Figure 3: Percentage changes in ACT Gross State Product and Australia Gross Domestic Product. Source: Table 4, ABS Catalogue No. 5220.0.
Figure 4: Changes in value of contribution of government administration and defence to the ACT economy between 1991–92 and 2002–03. Source: ABS Cat. No. 5220.0
Changes in Commonwealth Government policy can have a significant positive or negative impact on the ACT’s economy. The Department of Defence spends $800–1000 million in the local region each year. The decision to relocate Defence headquarters to the local ACT region is therefore very significant, adding up to an additional 1,000 jobs to the region (Draft Economic White Paper p.23).
A longer-term view of industry sectors
Property and business services is the second-highest contributor to the ACT economy, at just under 13% in 2002–03, having reached almost 14% in 2001–02 (see Table 5).
Data sources and references
Data for this indicator were sourced from primarily from the Australian Bureau of Statistics.
Gross State Product (Australian Bureau of Statistics Catalogue No. 5220.0) —the total market value of goods and services produced within a state or territory within a given period, after deducting the cost of goods and services used up in the process of production but before deducting allowances for the consumption of fixed capital. Thus gross state product, as here defined, is ‘at market prices’. The national equivalent is Gross Domestic Product.
State Final Demand (Australian Bureau of Statistics Catalogue No. 5206.0) —the aggregate obtained by summing government final consumption expenditure, household final consumption expenditure, private gross fixed capital formation and the gross fixed capital formation of public corporations and general government. It is conceptually equivalent to the Australia level aggregate domestic final demand.
Gross State product differs from State Final Demand in that it measures 'value added' by various industry sectors, rather than total final expenditure.
Participation rate—for any group, the labour force expressed as a percentage of the civilian population aged 15 years and over in the same group. Reference Labour Force, Australia (Australian Bureau of Statistics catalogue no. 6202.0)
Long-term unemployed—persons unemployed for a period of 52 weeks or longer. Reference: Labour Force, Australia (Australian Bureau of Statistics Catalogue No. 6203.0)
Australian Bureau of Statistics, Australian National Accounts: National Income, Expenditure and Product Catalogue No. 5206.0
Australian Bureau of Statistics, Australian National Accounts: State Accounts, Catalogue No. 5220.0
Australian Bureau of Statistics, Construction Work Done, Australia, Preliminary, Catalogue No. 8755.0
Australian Bureau of Statistics (2003) Dwelling Unit Commencements, Australia, Preliminary, Catalogue No. 8750.0, November
Australian Bureau of Statistics, Labour Force Survey, Catalogue No. 6202.0
Australian Bureau of Statistics (2001) (2002) (2003) Australian Social Trends, Cat. No. 4102.0
Australian Bureau of Statistics (2002) 2001 Census Time Series Profile Australian Capital Territory, Catalogue No. 2003.0
ACT Government (2003) Building Canberra's Economy: A discussion paper for the Economic White Paper, March 2003
Mitchell Resource Intelligence, National Institute for Economic and Industrial Research, Polmark, and SGS Economics and Planning, ACT Economic Catchment: A Study to define and map the economic relationship between the ACT and its Region for the ACT Government's Economic White Paper, October 2002.
 ACT Economic Catchment: A Study to define and map the economic relationship between the ACT and its Region for the ACT Government's Economic White Paper
 Shire names and boundaries have since been redefined by the NSW Boundaries Commission—as described elsewhere in the Australian Capital Region 2004 State of the Environment Report