Territory economic review
NT Treasury, Economic Analysis Division
Territory economic review; Department of Treasury and Finance newsletters; PublicationNT; E-Journals
Date:2001-09; Made available via the Publications (Legal Deposit) Act 2004 (NT).; This publication contains may contain links to external sites. These external sites may no longer be active.
Northern Territory -- Economic conditions -- Periodicals
Northern Territory Government
Northern Territorty Government
SEPTEMBER 2001 8 TERRITORY ECONOMIC REVIEW www.nt.gov.au/ntt/economic Previous constraints on inflation A weakening Australian economy over the latter half of 2000 and early 2001 led the RBA to cut interest rates in February and April 2001. The downturn in construction, timing effects related to the GST and Olympics, and the lagged impact of previously higher interest rates had led to a softening of employment and domestic demand, reducing inflationary pressures. In the context of weaker domestic demand and strong competitive pressures, the flow through of higher import prices and GST price increases to the CPI was limited. Although the effects of the lower exchange rate were passed through to producer and wholesale prices, as well as retail petrol prices, businesses were absorbing the costs. have been largely reversed The economic conditions limiting price increases have gradually been reversing. Lower interest rates, the collapse of some major price-discounters in industries such as insurance, food retailing, telecommunications and domestic air-travel will put upward pressure on prices. As well, the recovery in national housing and construction and improving consumer and business confidence will provide opportunities for businesses to rebuild margins. Moderating productivity growth will also put pressure on inflation. but the outlook is positive Two of the major indicators of inflation should provide positive signs in the short term. Crude oil prices have stabilised in the past few months while the Australian dollar has recovered slightly from the lows of March 2001. Any further appreciation in the Australian dollar will have a positive impact on import prices, with likely flow-on benefits to industry, and ultimately consumers. Also, the one-off inflationary effects of the new tax system are washing out of the system, with prices set to benefit in the medium term from embedded tax savings. CONSUMPTION Good indicator of onshore economy Consumption accounts for around three-quarters of expenditure in the Territory. Direct onshore benefits from oil field development and production have a large impact on measured GSP, but have little short term impact on the Territory economy. Consumption expenditure is recognised as a more reliable measure of onshore economic growth than GSP. still moderating After three years of strong growth, Territory private consumption growth weakened markedly in late 2000. Private consumption expenditure rebounded in the March quarter 2001, but annual growth remains weak, at 1.8 per cent. Over the same period government consumption fell by 0.1 per cent. Total consumption growth increased by 0.9 per cent. weak retail sales growth Real retail turnover (measured by quarterly chain volume estimates) has slowed over the past year, reflecting higher interest rates, petrol prices, the weak Australian dollar and weak consumer confidence. However, the current pattern of softer retail activity appears to be bottoming out. Real Territory retail turnover decreased 0.3 per cent over the June quarter and by 2.0 per cent in year on year terms. This has resulted from the overall moderation of the Territory economy, notably in the construction industry, and a slowing of the impetus associated with the defence force expansion. The lower year on year data also reflect the strength of the previous years December and March quarters. During these two quarters retail sales received a significant boost from the East Timor relief effort, which was followed by a stronger than usual June quarter, due to increased consumer spending prior to the introduction of the GST. and motor vehicle registrations In June year on year terms, Territory new motor vehicle registrations fell 7.9 per cent compared to a 10.5 per cent increase nationally. As for retail sales, the weak Territory figures reflect peaks associated with the East Timor relief effort in early 2000, and moderating business and consumer demand in the year to June 2001. Seasonally adjusted Territory registrations jumped 18.4 per cent in the June quarter 2001, and will have a positive influence on June quarter 2001 State Final Demand. Territory registrations fell 21.9 per cent in the March quarter 2001. Nationally there was a 2.6 per cent fall in registrations in the June quarter following on from a 8.9 per cent fall in the March quarter. Following tax policy changes commencing 24 May, businesses have been able to claim a full input tax credit for the GST, effectively lowering the cost of new business vehicles. As was the case with other policy initiatives (such as the Commonwealths extension of the First Home Buyers Scheme for the housing sector), it may take several months for the policy change to have a positive impact on business-related new vehicle registrations.
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