Productivity, Prosperity and Tasmanian Living … Productivity, Prosperity and Tasmanian Living...

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


% per annum

Nationalaverage


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


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


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


$ per hour worked

Nationalaverage

Labour cost per unit of output2005-06

35

40

45

50

55

60

65


$ 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


% per annum

Nationalaverage

0

1

2

3

4

5

6


% 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


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


% 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


%, 2005Nationalaverage

15-64 year olds whohave not completed Year 12

15202530354045


%, 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


% 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


0

20

40

60

80

100


Problem solving ability

0

20

40

60

80

100


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


Nationalaverage

Average science scores – Year 4

475

500

525

550


Nationalaverage

Average maths scores – Year 8

425

450

475

500

525

550


Nationalaverage

Average science scores – Year 8

475

500

525

550


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


$ 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

Productivity, Prosperity and Tasmanian Living … Productivity, Prosperity and Tasmanian Living...

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