In an excellent article in today’s Financial Review, John Roskam outlined the failures of the NSW administration, stating
At the rate it’s going, NSW will end up like Europe. A nice place to go for a holiday, but you wouldn’t want to live there. Or start a business there.
John then cites statistics showing that, since 1995, the growth in the NSW economy – as measured by gross state product (GSP) – has lagged considerably the other states and territories.
I thought it worth comparing the growth in real gross state product per capita since 1995.
It turns out that real GSP per capita in NSW since 1995 grew 25 per cent compared with the national average (real GDP per capita) of 33.4 per cent and the other states and territories as follows:
- Victoria, 36.8 per cent
- Queensland, 40 per cent
- South Australia, 37 per cent
- Western Australia, 38.7 per cent
- Tasmania, 38.9 per cent
- Northern Territory, 46.1 per cent
- Australian Capital Territory, 35.3 per cent
The data extracted from the ABS appears below.
It is telling that in 1995, GSP per capita in NSW exceeded the national average, it now is below the national average.
Now some of this relative decline is due to catch up by the other states – perhaps through better policies and better luck (eg: resources).
But a significant portion of the relative decline is probably due to poor governance – the lack of courage to take economically reformist policies and to govern in the State’s interest rather than looking after one or more vested interests. NSW today is close to, if not at, crony capitalism.
But at least it is a nice holiday destination.
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Gross state product
That’s extraordinary. The relative lag in growth rates is shameful. MY pet theory about the lagging GDP in NSW is that real estate takes up much of their spending with not much left over for other things relatively speaking.
That’s also caused by government inaction or rather a government doing everything wrong in terms of keeping the cost of real estate down through supply side measures.
JC1
26 Mar 10 at 11:11 pm
I agree with JC, but since they’re no better or worse than anyone else at real-estate supply (e.g., Victoria), I guess that means that, for the large part, the difference isn’t due to governance.
conrad
27 Mar 10 at 6:50 am
Look at the per capita numbers for the ACT and NT. The solution is obvious. NSW should give up being a state and become a territory.
TerjeP (say tay-a)
27 Mar 10 at 7:17 am
JC you are onto something. Conrad you should take notice.
The mail is that it costs as much as actually buying an industrial building with land in outer Melbourne as it does to pay for developer fees for a similar property in outer Sydney.
It’s like the Austrian business cycle theory applied to structural problems of an economy.
Have a look at NSW property prices since 2002-3, when the developer’s fees cut in.
There is very low rates of return on new development. Supply is strangled, and prices now rise dramatically.
On the other hand I cannot believe that we are now seriously considering Kelo style development. What about just compensation etc?
Don’t vote for Christina because she’s bubbly. Vote for her if you like crony capitalism.
The Orange Grove fiasco should haunt the ALP in the polls. It is not that they are always wrong. It is that a lot of what they are doing now is simply bad policy, both in outcomes and on principle, even their own.
Semi Regular Libertarian
27 Mar 10 at 8:57 am
Well the ACT should be left out of that comparison as we knows its main product is rent-seeking and rent-extraction services.
Jason Soon
27 Mar 10 at 10:14 am
A profitable and growing business, though, Jason.
But is it sustainable?
ken n
27 Mar 10 at 10:39 am
SRL — give that there isn’t much industry left in Melbourne that needs that type of space, I’m not sure that matters much (not unlike Sydney) — I think that Melbourne is quickly catching up to Sydney for real-estate, and so I suppose it will experience similar problems of money being used non-productively (although perhaps a lot of money coming into Melbourne is really hot-money from overseas, so it might not be so bad).
Jason: the ACT should be left in the comparison (perhaps with subsidies taken out), because in terms of housing, it’s the most artificially constrained housing market (if I can call it a market) in Australia. The only reason land costs anything in the ACT as far as I can tell is because of pointless government restrictions. At least Melbourne and Sydney actually do have real supply problems and enough people that you need to worry about planning. So it’s like a big circle — all the government bureaucrats buy houses made expensive by the government, which then gets some of it’s money back.
conrad
27 Mar 10 at 11:06 am
the most interesting thing about the governments in NSW was that the main object was to reduce debt.
you can only reduce spending on essential services and infrastructure so far and they are deservedly getting the blame for the awful state they are in.
Butterfield, Bloomfield & Bishop
27 Mar 10 at 12:20 pm
[...] economic performance since 1995, as measured by growth in real gross state product per capita: Via Cattalaxy Files and John Roskam’s column in Friday’s [...]
Stat of the day « Beats and Pieces
27 Mar 10 at 12:43 pm
“the most interesting thing about the governments in NSW was that the main object was to reduce debt.”
No it wasn’t. It was to do lots of things, like implement a simple ticketing system for public transport, and they miserably failed at all of them it appears (is there anything the NSW government succeeded in?). That’s no doubt one reason NSW has done so poorly, but then they failed at most things in VIC also, so there must be other reasons apart from the inability to do anything useful and on budget for the difference.
conrad
27 Mar 10 at 1:34 pm
Sorry, I should say that they succeeded at creating a north-south pipeline in Victoria. But it’s not clear why you would actually want that when you are also creating a desalination plant that can generate essentially infinite amounts of water. It’s also not clear why you want a desalination plant when recycling could have been used for a tiny fraction of the cost. So the Victorian government did succeed at creating things that don’t appear to have any real use, whereas NSW is so hopeless, it can’t even get that far. It just gets to pay contractors after pulling out of things.
conrad
27 Mar 10 at 1:37 pm
Here’s two other promises not to do with public transport that have obviously gone by the wayside since I lived in Sydney many years ago:
1) Move the airport so people in high density population areas don’t have to listen to planes all day.
2) Build some sort of decent sewage treatment plant so people can stop swimming in shit every time the current turns around.
conrad
27 Mar 10 at 1:50 pm