A new SGS report Australia’s Economic Wellbeing reveals that Australia’s economy is on the mend, but GDP growth is uneven across the nation. As Australia’s economy continues to recover, we need to renew our focus on building back better. Returning to previous GDP levels is not enough.
In 2020, Australia hit its first recession in almost 30 years with -0.3 per cent GDP growth in the March 2020 quarter and -0.7 per cent growth in the June quarter, but it is now on the mend with GDP (gross domestic product) growth in the September and December 2020 quarters reaching 3.4 per cent and 3.1 per cent respectively.
Over the past 20 years at a national level, the other negative growth quarters, including the Global Financial Crisis, are barely noticeable compared to the economic shock in the 2019-20 financial year, which includes the full effects of the 19/20 Black Summer bushfires and part of the COVID-19 global pandemic.
QUARTERS WITH NEGATIVE NATIONAL ECONOMIC GROWTH OVER THE LAST 20 YEARS
Uneven growth across the nation
Regional economies have experienced varying levels of economic growth. For example, since 2000, many parts of Australia experienced economic contraction (or what could be described as a recession). The recovery from COVID-19 will be felt differently across the communities within each state, driven by the local mix of industries – such as manufacturing, tourism, agriculture, health and education.
Some states struggled more than others
The states and territories were not all affected evenly by the Black Summer bushfires and COVID-19. Regional WA and the NT showed relatively strong economic growth per capita in 2019-20. The ACT’s GRP (gross regional product) per capita grew as the public service got to work implementing JobSeeker, JobKeeper and other programs to support Australian communities. Sydney, Melbourne, Brisbane, Adelaide and Perth all showed declines in GRP over 2019-20, as did regional NSW, VIC and SA.
Sydney almost back on track, Melbourne in the economic doldrums
In recent decades, Melbourne has outperformed the rest of Australia but that ended in 2019-20 with a 1.8 per cent per capita fall in GRP, which is likely to be understated because it does not consider the full impact of the second wave of COVID-19 in the second half of 2020. Sydney GDP per capita fell by 2.5 per cent in 2019-20, a greater decline than NSW or Australia as a whole.
When Sydney’s economy was at its worst in the first half of 2020, Melbourne’s economy was holding ground. But then the second wave of COVID-19 hit Melbourne. The two economies flipped, and Melbourne’s economic growth is estimated to hit its lowest levels in over 20 years. The big difference between the two cities is that, as of late last year, Sydney’s economy is now almost back on track, whereas Melbourne remains in the economic doldrums.
'Work from home' jobs keep economies going
Knowledge services or 'work from home jobs' had a significant advantage compared to other industry groupings. Most of these service providers could do their jobs from their kitchen benches with a laptop and a video communications account. In Sydney, Melbourne and Perth, knowledge industries only showed slow growth in 2019-20, rather than a decline in overall economic activity.
If COVID-19 had happened twenty years ago, we’d be looking at a very different story. Capital cities would be in a grimmer situation now without access to the technologies that enabled a rapid shift to working from home for many office-based workers.
Many industries have not yet returned to pre-COVID levels of growth
Some industries were still showing substantially lower GDP in the December 2020 quarter than the December 2019 quarter. Industries dependent on tourism were still struggling in particular, with the transport sector showing 16 per cent less economic activity in the December 2020 quarter compared to December 2019. Administrative services, accommodation, food services, and the arts were all still producing much less than they had at the end of 2019.
IMPACT OF COVID-19 RESTRICTIONS ON EMPLOYMENT IN SELECTED INDUSTRIES
Building back better
Until COVID-19 is effectively suppressed globally, Australia’s borders will likely remain tightly managed and local economies will continue to be subject to short term restrictions. These limits on activities could have enduring impacts, re-shaping Australia’s places, communities and economies.
Much of Australia’s economic wellbeing over the next two years remains uncertain. Now is the time to continue to shift how we understand and build societal health and prosperity, looking beyond economic growth to collective wellbeing and environmental sustainability. Our focus should be on building back better, not just economic growth.
As Australia’s national economy continues to recover, we should keep in mind how the health and environmental shocks of 2019 and 2020 have affected Australia’s vulnerable communities and work towards healthy and resilient communities that address underlying spatial inequalities.
We need to focus national growth on enhanced wellbeing and improving living standards across all communities. Economic recovery from COVID-19 should have a focus on building back better, not just returning to previous levels of GDP growth.
About the report
For the past ten years, SGS has published Australia’s Economic Wellbeing (formerly Economic Performance of Australia’s Cities and Regions) to fill a void in economic policy research. The publication shows small area estimates of Gross Regional Product (GRP) of every major city and region in Australia (a regional breakdown of the more familiar Gross Domestic Product (GDP) calculations) and highlights the economic challenges they face.
Economic development is measured in terms of income and employment as well as improvements in education, health, culture, community wellbeing and the environment. Our research methodology recognises that economic development is a continuous process of growing an area's level of income and capital and how this income and capital are distributed among the community. This is a focus on economic wellbeing. The data reports on the performance of cities and regions and the implication of the overall wellbeing of places, communities and economies.
This research project is self-funded by SGS and managed by Marcia Keegan, Julian Szafraniec and Kishan Ratnam.
- This edition of Australia’s Economic Wellbeing (formerly Economic Performance of Australia’s cities and regions) provides an update for the 2019-20 financial year and preliminary estimates for the second half of 2020 based on modelled GRP of Melbourne and regional Victoria.
- The fall in GRP (gross regional product) experienced by Australia’s cities and regions for 2019-20 balances one wholly and one partly COVID-19-affected 2020 quarter with the two pre-COVID 2019 quarters, lessening the magnitude of the decline. Therefore, all data reported in this period should be seen as representing all of the impacts of the 2019-20 Black Summer bushfires and only part of the impact of COVID-19.
For further information contact:
National Leader for Data & Spatial Analysis | Principal & Partner I Executive Director