The second Global Financial Crisis (GFC)

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NIEIR’s base case takes the view that any inflationary pressures that may well intensify over the next eighteen months, including from a Republican Government in the United States increasing tariffs again and the impact of immigration outflows. However, these pressures will be ended in 2026 from a world recession from interest rate rises caused by a meltdown in United States bond markets, thus forcing a 2nd GFC.


The cause of the 1st GFC in 2008-09 was instability in United States housing markets. The cause of the 2nd GFC will be the inability of the United States to control its Federal public sector deficit, which is currently at 7 per cent of Gross Domestic Product (GDP). The Congressional Budget Office (CBO), responsible for monitoring the deficit projects the deficit to remain stable to the early 2030s. However, this is based on implausibly optimistic assumptions.


World GDP growth is predicted at a reasonable 3.0 per cent for 2025, 0.5 per cent for 2026 and a weak 1.6 per cent for the following year. In 2028 there is a recovery to 2.2 per cent. However, the scaring of the 2nd GFC restricts world GDP growth to an average of 2.3 per cent per annum for the balance of the period to 2040. This is low compared to the historical record, in part because of the low growth prospects for the United States as its deficit comes under, and is held under, control. For Australia GDP growth is 2.0 per cent for 2024-25 and 2.3 for 2025-26, in part due to lower interest rates early in the year. In 2026-26 growth is zero and 2.0 per cent for the following fiscal year. For the 2026-2027 period the Australian unemployment rate is 5.5 per cent and then drifting up to the 6.0 per cent mark due to the relatively poor prospects for the world economy.


These projections were made before the result of the United States election was known and took the view that a 2nd GFC was likely on the balance of probabilities irrespective of who won the election. This is because the fiscal settings of the United States Federal Government are dire given the relatively small fiscal footprint of the Government relative to the deficit. The maintenance of short-term inflationary pressures, by requiring interest rates to be higher for longer, will be a contributing factor to the early timing of the 2nd GFC because it will increase the short-term projections of the United States deficit. The election of Donald Trump has increased the probability of occurrence and, in all likelihood, its intensity.

Download the supplement report here (PDF)

State of the Regions Report 2022-2023: Industries, trade & occupations in uncertain times

Unlock critical insights with this comprehensive report, analysing industry trends, trade flows, and shifts in wealth and occupation patterns across Australia, the US, and beyond—including impacts from the post-COVID period  and the United States political-economy and Australia to 2040.

With over 30 years of economic research, it’s an indispensable tool for government bodies, businesses, and policymakers adapting to today’s challenges. This report provides data-driven analysis for strategic, impactful decisions, highlighting growth opportunities and navigating regional challenges with detailed, actionable insights shaped by both resilience and recovery.

Download our free main report from sor.nieir.com.au

Performance of Australia’s Regions: Benchmarking and Rankings 2019-2023

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The pattern of GDP growth outcomes over the fiscal years 2019 to 2023 is generally in accordance with expectations given the pattern of COVID-19 lockdowns.

Except for the outer Melbourne regions, namely Melbourne Outer South and Melbourne Outer South East, which experienced small gains in Gross Regions Product (GRP), all other Melbourne regions experienced falls in GRP between fiscal years 2019 and 2021.

The Sydney area had the next most adversely impacted group of regions over the 2019-2021 years. Sydney Central did grow by half its historical average but most other Sydney regions experienced a decline in GRP. In terms of the New South Wales non- metropolitan regions, only one region experienced a negative growth rate, Far West, while Illawarra, NSW South East and South West produced growth rates equal to, or better than, the historical trend.

The Brisbane area regions in general produced GRP growth rates that were equal to, or marginally down, on the historical 2008-2019 trends, as did the Sunshine Coast. The Gold Coast GRP growth rate was relatively low at 0.8 per cent per annum. The Queensland regions which produced negative growth rates were Toowoomba Darling Downs, Rockhampton, Townsville and the Outback.

All the South Australian regions produced GRP growth rates equal to or better than the historical growth rates, as did the Western Australian regions with the exception of South West and the Pilbara Kimberley regions.

Both the Tasmanian regions and the ACT produced growth rates that were near or better than the historical trends.

Darwin’s growth rate fell significantly compared to historical trends.

Download the supplement report here (PDF)

State of the Regions Report 2022-2023: Industries, trade & occupations in uncertain times

Unlock critical insights with this comprehensive report, analysing industry trends, trade flows, and shifts in wealth and occupation patterns across Australia, the US, and beyond—including impacts from the post-COVID period  and the United States political-economy and Australia to 2040.

With over 30 years of economic research, it’s an indispensable tool for government bodies, businesses, and policymakers adapting to today’s challenges. This report provides data-driven analysis for strategic, impactful decisions, highlighting growth opportunities and navigating regional challenges with detailed, actionable insights shaped by both resilience and recovery.

Download our free main report from sor.nieir.com.au

State of the Regions 1994 to 2019

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A land boom, a mining boom and their aftermath

Beginning in 1996, NIEIR’s State of the Regions reports have documented the economic progress of Australia’s regions, both urban and country. Issued annually, each report has covered the current year and the immediate past. The reports chronicle a period of relatively stable growth, at national level, in the major economic indicators including Gross Domestic Product and National Income. Growth in these indicators was driven by growth at the regional level, with stability at the national level achieved by balancing out the fate of the various regions, some of which prospered and some of which fell behind.

This quarter century of sustained growth ended with the advent of COVID-19 in 2020. Whether or not it can be resumed post COVID-19, it is opportune to assess regional economic performance over this period of sustained growth, as covered in the State of the Regions reports. Rather than provide a summary of the annual reports, this overview report goes back to the original statistics and assesses the period as a whole. For statistical purposes, the period begins with the recovery from the 1990 recession (most of the comparisons begin with the 1993-94 financial year) and ends with the 2018-19 financial year.

This report divides Australia into 67 regions, each with precise geographically boundaries. Each region is considered from two points of view: as a region in which production takes place and as a region in which income is received. The first point of view concentrates on the location of economic activity – activity organised by employers (including the self employed) and generating paid work. The second point of view highlights where people live, mainly in household dwellings but also in various kinds of more-or-less permanent institutional accommodation.

The first point of view concentrates on the value of production in each region (on a production or workplace basis) while the second centres on incomes received (on a residential or household basis). The basic statistical framework is provided by the National Accounts, which the ABS prepares at national and state/territory level. The State of the Regions reports extend this framework to the regional level on both a production basis and a residential basis.

 

Download the report

 

Protected: GOTAFE Industry Mapping

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Fast Train Project Macro Economic Assessment July 2020

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STRONGER, TOGETHER – An independent state-wide macroeconomic assessment of fast regional commuter rail network impacts on Victorian settlement patterns, economic growth, fairness and opportunity.

With a population approaching five million, the Melbourne metropolitan area accommodates around three-quarters of the population of Victoria. Five railway lines radiate from Melbourne towards a mixture of major provincial cities, towns, ex-urban areas and farmland.

In the first half-decade of the current century the government of Victoria upgraded the country portions of four of the five rail lines to clear one track for 160 kph running.

The current project proposal follows on and includes electrification of the five lines, a modest increase in maximum speed from 130/160 kph to 200 kph and further increases in frequency of service.

The present study is confined to addressing the effects of the Project on the productivity of the Victorian economy and its constituent regions via its influence on producers’ choices as to where to locate economic activity and citizens’ choices as to where to live. It accordingly assumes that the Project is viable in terms of patronage (and hence modal split), costs (including health and safety benefits) and environmental benefits including greenhouse gas emission abatement.

https://nieir.com.au/wp-content/uploads/2020/07/Fast Train Project Macro Economic Assessment July 2020.pdf

For comment, please contact:

Dr Ian Manning
0447 653 711

The Geography of Personal and Household Incomes

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Data from the Census of Australia

Ian Manning, National Institute of Economic and Industry Research and
charter member, Brotherhood of St Laurence

Paper for the Australian Social Policy Conference, Social Policy Research Centre,
University of New South Wales

11 September 2019

 

Download the full paper (pdf)

Download the presentation (zip/pptx)

 

“Data is not information, information is not knowledge, knowledge is not understanding and understanding is not wisdom.”  (Clifford Stoll)

 

For two decades the National Institute of Economic and Industry Research has prepared a State of the Regions report for the Australian Local Government Association. Each annual report includes measures of inter-regional income inequalities based on National Accounts data. This paper first reviews the National Accounts indicators and then considers alternative indicators based on Census data, including the geographic patterns they reveal. The comparisons were made for each of the 544 LGAs listed in the Census but for purposes of exposition the results were aggregated to 67 regions.

The 2016 Census required respondents aged 15 and over to tick a box to denote their weekly income. The Census form included the comment: ‘information from this question provides an indication of living standards in different areas’. The Census income data are published as personal income and equivalised household income. The geographic patterns revealed in the Census data were described in the State of the Regions report for 2019-20 and are here further analysed, concentrating on the proportion of households, by region, reporting incomes in the bottom and top deciles of equivalised income.

The geographic distributions of income documented from the Census indeed throw light on living standards, but there are no conclusions, only further questions, such as the following.

  • In what kinds of region do low personal incomes generate low equivalised incomes?
  • Why is Sydney so income-segregated?
  • What are the effects of fly-in fly-out and indigenous residence on living standards in remote areas?

National populations are a natural focus for studies of inequality, since national governments preside over taxation and public expenditure policies which directly affect the distribution of income and wealth. In Australia the national distribution of income, wealth and consumption expenditure, both between individuals and households, has been assiduously documented in a series of sample surveys, beginning with the ABS survey of income distribution for the Poverty Inquiry in 1973 and continued since, particularly in the ABS surveys of income and household expenditure and in the University of Melbourne HILDA survey. The surveys have been analysed in a search for trends, with the results somewhat dependent on the indicators of inequality chosen. The most definite results have included the association between income and employment (employed people generally receive higher incomes than not-employed), income and industry of employment (some industries pay better than others), income and gender (men tend to have higher individual incomes than women) and income and age (both young and old have lower incomes than the middle aged) (Productivity Commission 2018). The national distribution maps down to the regional level, so that regions where unemployment rates are low are expected to have high regional incomes, and likewise regions with middle-aged populations and regions where employment is concentrated in high-income industries. (One might add regions with masculine populations, but fortunately the sex ratio does not vary much between regions except as a consequence of age distribution.)

Though regional inequality of income can confidently be predicted from the national sample surveys, they cannot be proven from this source; neither can it be shown that regional inequality is greater or less than indicated by the factors identified at national level due to the influence of regional factors. The problem is simple: national sample surveys do not yield results which are statistically significant at the regional level.  Two main sets of indicators are in use to identify rich and poor regions. One set derives from administrative sources and is summarised in Gross Regional Product, the other set derives from the Census. This paper describes and assesses the available measures, limiting itself to recent estimates (the financial year 2018-19 and Census 2016). It does not attempt to quantify trends, but does attempt to identify the reasons why particular regions are currently rich or poor.

 

 

Electricity generation by SOR regions

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Australia generated around 247,109 GWh of electricity in the 2019 financial year, which included 196,723 GWh from fossil fuels and 50,386 GWh from renewable sources. In 2019 renewable energy made up 20.4 per cent of total generation, while in 2018 the proportion of renewable generation was 18.7 per cent.

The following chart presents Australian annual electricity generation (GWh) for each of the SOR regions for the 2019 financial year. It shows the supply of electricity by each major fuel type within the region rather than electricity consumption (or electricity demand). The supply of electricity captures metered generation from grid sources from the National Electricity Market and South-West Interconnected System. Supply to smaller networks, off-grid and behind the fence industrial loads have been estimated and included where possible.

For more details, please refer to the State of Regions 2019-2020 report.

Distribution of household income: A 2016 snapshot

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It is estimated that in 2016, 5.7 per cent of the population lived in households with very low incomes after allowance for household size. We identify poor households as those with incomes below the 10th percentile. Judged by the proportion of households with incomes at this level, the poorest regions were either remote or urban. Two remote regions matched this profile: NT Lingiari and SA Far North and West. Other remote and resource-based regions reported proportions around the national average. Among metropolitan regions, Sydney Mid-West stood out as particularly disadvantaged. The only other metropolitan region remotely like it was Adelaide North. There were no equivalents in the other metropolitan areas. No ex-urban or lifestyle regions stood out. However, the proportion of poor households was above the national average in several rural regions. Insofar as high income supports a high standard of living, the most prosperous regions were the ACT, Darwin, the Sydney metropolitan core, the central regions of Melbourne, Perth and Brisbane, and the WA Pilbara Kimberley.

Note: Equivalised income applies to households living in private dwellings which reported their incomes. Between 2011 and 2016 the household consumption price index as recorded in the National Accounts rose by approximately 6 per cent, hence after adjustment for inflation overall median income rose by approximately 9 per cent or 1.6 per cent a year.

For more details, please refer to the State of Regions 2019-2020 report.

Exports to China by State (1996-2017)

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Data originally published in State of Regions 2018.