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economics@
Productivity, Prosperity and Tasmanian Living StandardsProductivity, Prosperity and Productivity, Prosperity and Tasmanian Living StandardsTasmanian Living Standards
Presentation to a lunch hosted by the
Tasmanian LiberalsPresentation to a lunch hosted by thePresentation to a lunch hosted by the
Tasmanian LiberalsTasmanian Liberals
MatsonMatson’’ssLauncestonLaunceston
2626thth February 2007February 2007
Saul EslakeSaul EslakeChief EconomistChief EconomistANZANZ
www.anz.com/go/economicswww.anz.com/go/economics
economics@2
Tasmania’s economy has grown faster than that of the mainland over the past five yearsTasmania’s economy has grown faster than that of the mainland over the past five years
Growth in real gross State product
-3
-2
-1
0
1
2
3
4
5
6
7
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
Tasmania
Mainland
Real % change from year earlier(years ended June 30)
Sources: ABS State Accounts (5220.0) 2005-06; Economics@ANZ
economics@3
Tasmania has again grown faster than any of the other ‘non-resource-rich’ States since 2000-01Tasmania has again grown faster than any of the other ‘non-resource-rich’ States since 2000-01
Real GSP growthfive years to 2005-06
Real per capita GSP growthfive years to 2005-06
0.0
1.0
2.0
3.0
4.0
5.0
6.0
NSW Vic Qld SA WA Tas NT ACT
% per annum
Nationalaverage
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
NSW Vic Qld SA WA Tas NT ACT
% per annum
Nationalaverage
Sources: ABS State Accounts (5220.0) 2005-06; Economics@ANZ
economics@4
Tasmania’s per capita GSP and household income have begun to rise relative to national averagesTasmania’s per capita GSP and household income have begun to rise relative to national averages
Per capita State product
70
75
80
85
90
95
79 82 85 88 91 94 97 00 03 06
Tasmania as a % of national average
Seriesbreak
75
80
85
90
95
79 82 85 88 91 94 97 00 03 06
Tasmania as a % of nationalper capita average
Series break
Household disposable income
Sources: ABS State Accounts (5220.0) 2005-06; Economics@ANZ
economics@5
-5
0
5
10
15
20
90 95 00 05 10
% of gross State product
Forwardestimates
Tasmanian ‘general government’ sector net debt
Tasmania has eliminated general government debt whilst reducing its relative tax burdenTasmania has eliminated general government Tasmania has eliminated general government debt whilst reducing its relative tax burdendebt whilst reducing its relative tax burden
Tasmanian State tax ‘severity ratio’
85
90
95
100
105
110
115
120
90 95 00 05
Average of all States andTerritories = 100
Sources: Tasmanian Budget Papers and 2006-07 Mid-Year Review; Commonwealth Grants Commission.
economics@6
Growth in the Tasmanian economy slowed quite markedly during 2006Growth in the Tasmanian economy slowed Growth in the Tasmanian economy slowed quite markedly during 2006quite markedly during 2006
State final demand Employment
-4
-2
0
2
4
6
8
10
12
01 02 03 04 05 06
% ch. from year earlier(trend)
Main-land
Tasmania-2
-1
0
1
2
3
4
5
01 02 03 04 05 06 07
% change from year earlier(trend)
Mainland
Tasmania
Sources: ABS, Australian National Accounts: State Details (5206.0); Labour Force (6202.0); Economics@ANZ.
economics@7
Interstate migration to Tasmania has slowed to a trickle …Interstate migration to Tasmania has slowed to a trickle …
Population growth
-0.25
0.00
0.25
0.50
0.75
1.00
1.25
1.50
01 02 03 04 05 06 07
% change from year earlier
Mainland
Tasmania
Migration to Tasmania
-50
-40
-30
-20
-10
0
10
20
30
40
50
60
01 02 03 04 05 06 07
No per week (annual movingaverage
Fromoverseas
From themainland
Sources: ABS Demographic Statistics (3101.0).
economics@8
… and business investment has slowed sharply as major energy projects have been completed…… and business investment has slowed sharply and business investment has slowed sharply as major energy projects have been completedas major energy projects have been completed
Buildings and structures Equipment, plant and machinery
-100
-50
0
50
100
150
01 02 03 04 05 06
% change from year earlier (trend)
Mainland
Tasmania
-40
-30
-20
-10
0
10
20
30
40
50
60
01 02 03 04 05 06
% change from year earlier (trend)
Main-land
Tasmania
Sources: ABS, Private New Capital Expenditure (5625.0)
economics@9
Productivity is ‘what you get out for what you put in’ - and it mattersProductivity is Productivity is ‘‘what you get out for what you what you get out for what you put input in’’ -- and it mattersand it matters
“Productivity is the prime determinant in the long run of a nation’s standard of living, for it is the root cause of per capita national income
High productivity not only supports high levels of income but allows citizens the option of choosing more leisure instead of working longer hours.
It also creates the national income that is taxed to pay for public services which again boosts the standard of living
The capacity to be highly productive also allows a nation’s firms to meet stringent social standards which improve the standard of living, such as in health and safety, equal opportunity and environmental impact”
– Michael E. Porter, The Competitive Advantage of Nations (1991), page 6
economics@10
Tasmanian labour productivity has risen faster than the mainland in three of the past five yearsTasmanian labour productivity has risen faster Tasmanian labour productivity has risen faster than the mainland in three of the past five yearsthan the mainland in three of the past five years
Labour productivity growth – Tasmania vs the mainland
-8
-6
-4
-2
0
2
4
6
8
10
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
Tasmania
Mainland
% change from year earlier(years ended June 30)
* Labour productivity defined as real gross State product per hour worked. Sources: State Accounts (5220.0); ABS Employed persons by sex, age,hours worked, state (6291.0.55.001); Economics@ANZ.
economics@11
However Tasmanian productivity is still more than 14% below the national averageHowever Tasmanian productivity is still more than 14% below the national average
Tasmanian productivity relative to national average
80
82
84
86
88
90
92
94
96
81 86 91 96 01 06
Tasmania as a % of nationalper capita average
Series break
150
175
200
225
250
275
300
NSW Vic Qld SA WA Tas NT ACT
GSP per hour worked ($)
Nationalaverage
* Productivity defined as real gross State product per hour worked. Sources: State Accounts (5220.0); ABS Employed persons by sex, age, hours worked, state (6291.0.55.001); Economics@ANZ.
economics@12
Below-average productivity eliminates the ‘advantage’ of below-average labour costsBelow-average productivity eliminates the ‘advantage’ of below-average labour costs
Labour cost per hour worked2005-06
80
90
100
110
120
130
140
150
160
170
180
NSW Vic Qld SA WA Tas NT ACT
$ per hour worked
Nationalaverage
Labour cost per unit of output2005-06
35
40
45
50
55
60
65
NSW Vic Qld SA WA Tas NT ACT
$ per $100 of grossState product
Nationalaverage
Sources: ABS State Accounts (5220.0); Employed persons by sex, age, hours worked, state (6291.0.55.001); Economics@ANZ.
economics@13
Tasmanian productivity has been improving – but unit labour costs have been rising even fasterTasmanian productivity has been improving – but unit labour costs have been rising even faster
Labour productivity growth2000-01 to 2005-06
0.0
0.5
1.0
1.5
2.0
2.5
3.0
NSW Vic Qld SA WA Tas NT ACT
% per annum
Nationalaverage
0
1
2
3
4
5
6
NSW Vic Qld SA WA Tas NT ACT
% per anum
Nationalaverage
Unit labour cost growth2000-01 to 2005-06
Definitions and sources as for preceding two charts.
economics@14
By 2005-06, Tasmania was investing almost as large a share of its GSP as the mainlandBy 2005By 2005--06, Tasmania was investing almost as 06, Tasmania was investing almost as large a share of its GSP as the mainlandlarge a share of its GSP as the mainland
Business investment as a share of GSP
Investment as a share of GSP2001-02 to 2005-06
5
6
7
8
9
10
11
12
13
14
15
16
90 94 98 02 06
% of GSP
Tasmania
Mainland
0
5
10
15
20
25
30
35
NSW Vic Qld SA WA Tas NT ACT
Public
Business
% of GSP
Nationalaverage
Note: ‘Investment’ refers here to non-residential fixed capital expenditure, ie excluding housing and stocks. Business investment excludes purchases of second-hand assets from the public sector.Sources: ABS State Accounts (5220.0) 2005-06; Economics@ANZ
economics@15
Tasmanian businesses are the least innovative in Australia (apart from Canberra)Tasmanian businesses are the least innovative in Australia (apart from Canberra)
Businesses innovating,2004 and 2005
26
28
30
32
34
36
38
40
42
NSW Vic Qld SA WA Tas NT ACT
% of all businesses
Nationalaverage
0
10
20
30
40
50
60
5-19 20-99 100+ Total
Tasmania Australia
% of all businesses
Businesses innovating, by number of employees
Source: ABS, Innovation in Australian Business 2005 (8158.0)
economics@16
15-64 year olds withpost-school qualifications
Tasmania has the poorest educational attainment rankings of any State or TerritoryTasmania has the poorest educational attainment Tasmania has the poorest educational attainment rankings of any State or Territoryrankings of any State or Territory
40
45
50
55
60
NSW Vic Qld SA WA Tas NT ACT
%, 2005Nationalaverage
15-64 year olds whohave not completed Year 12
15202530354045
NSW Vic Qld SA WA Tas NT ACT
%, 2005Nationalaverage
363840424446485052
93 94 95 96 97 98 99 00 01 02 03 04 05
% of total
Tasmania
Australia
30323436384042444648
93 94 95 96 97 98 99 00 01 02 03 04 05
% of totalTasmania
Australia
Source: ABS, Education and Work, Australia, (6227.0); Australian Social Trends (4102.0).
economics@17
Disturbingly, the Year 12 retention rate slipped back last year to its lowest since 1998Disturbingly, the Year 12 retention rate slipped back last year to its lowest since 1998
School retention rates to year 12
20
30
40
50
60
70
80
82 87 94 95 96 97 98 99 00 01 02 03 04 05
% National average
Tasmania
60
65
70
75
80
85
90
NSW Vic Qld SA WA Tas NT ACT
% 2005
Nationalaverage
Source: ABS, Schools Australia (4221.0)
economics@18
But it’s also important to monitor quality of outcomes – where Tasmania isn’t doing so wellBut itBut it’’s also important to monitor quality of s also important to monitor quality of outcomes outcomes –– where Tasmania isnwhere Tasmania isn’’t doing so wellt doing so well
Reading literacy
Mathematical literacy
0
20
40
60
80
100
NSW Vic Qld SA WA Tas NT ACT
0
20
40
60
80
100
NSW Vic Qld SA WA Tas NT ACT
Problem solving ability
0
20
40
60
80
100
NSW Vic Qld SA WA Tas NT ACT
Below Level 1 (‘likely to be seriouslydisadvantaged in life beyond school’)
Level 1(lowest)
Level 2 Level 3
Level 6(highest)Level 4 Level 5
Results based on testing of 12,500 students from 321 schools randomly selected from across Australia in 2003 as part of an OECD-sponsored assessment involving 41 countries.
Source: Australian Council for Educational Research; Program for International Student Assessment (PISA).
economics@19
Tasmanian students slip back relative to their mainland counterparts between Years 4 and 8Tasmanian students slip back relative to their Tasmanian students slip back relative to their mainland counterparts between Years 4 and 8mainland counterparts between Years 4 and 8
Average maths scores – Year 4
450
475
500
525
NSW Vic Qld SA WA Tas NT ACT
Nationalaverage
Average science scores – Year 4
475
500
525
550
NSW Vic Qld SA WA Tas NT ACT
Nationalaverage
Average maths scores – Year 8
425
450
475
500
525
550
NSW Vic Qld SA WA Tas NT ACT
Nationalaverage
Average science scores – Year 8
475
500
525
550
NSW Vic Qld SA WA Tas NT ACT
Nationalaverage
Source: Trends in International Mathematics and Science Study 2002-03
economics@20
The arts could do with some extra funding too!The arts could do with some extra funding too!
Per capita arts funding by State & Territory governments, 2004-05
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
2.1
95 96 97 98 99 00 01 02 03 04 05 06 07
$mn
Nominal terms
In 2005-06 $
Temporaryfunding
from ESIF
0
10
20
30
40
50
60
70
80
NSW Vic Qld SA WA Tas NT ACT
$ per head
Nationalaverage
Arts grants administered byTas Arts Advisory Board
Source: ABS, Cultural Funding by Government 2004-05 (4183.0); Arts Tasmania.Disclosure: I’m also Chair of the Tasmanian Arts Advisory Board.
economics@21
Tasmania’s future ...TasmaniaTasmania’’s future ...s future ...
… cannot possibly lie predominantly in the volume production of essentially unprocessed commodities at lower prices than competitors with better access
– to larger and cheaper resources of labour and capital
– and to markets (by virtue of proximity of membership of trade blocs)
… but instead depends on its capacity to produce and market
– highly differentiated goods and services– embodying a relatively high intellectual content– for which customers are willing to pay premium
prices
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