EXPERIMENTAL ESTIMATES OF CAPITAL STOCK BY STATE

The Australian Bureau of Statistics (ABS) has compiled experimental estimates of capital stock for the states of Australia. Experimental estimates, and an articulation of the compilation methodology used, were first published in December 2016 in Emphasising the State perspective: Experimental estimates of State capital stock, 2015-16 (cat. no. 5220.0.55.005). These estimates of state gross fixed capital formation and net capital stock by asset, by industry and by sector allow for more detailed analysis of state economies.

This article discusses an updated set of state capital stock estimates for 2016-17 which are published in Australian National Accounts: State Accounts (cat. no. 5220.0), and which are consistent with national capital stock statistics already published in Australian System of National Accounts (cat. no. 5204.0). The state capital stock estimates are compiled using a number of assumptions and constraints based on available data sources.

The state capital stock estimates presented in this article are a key input to multifactor productivity analysis. Experimental estimates of multifactor productivity for individual states will be released for the first time on 24 November, in Estimates of Industry Multifactor Productivity (cat. no. 5260.0.55.002).


ANALYSIS

The relative size of net capital stock for the states and territories falls broadly in line with the relative size of their gross state product (GSP). The four largest states in terms of net capital stock also have the four largest economies.

In 2016-17, New South Wales had the largest net capital stock ($1,644.3 billion), followed by Victoria ($1,283.8 billion), Queensland ($1,248.0 billion) and Western Australia ($948.2 billion). Queensland's net capital stock has almost drawn level with Victoria’s, despite having a smaller GSP. In total, these four states accounted for 88.8% of Australia's total net capital stock in 2016-17.

	Throughout this article, ‘states’ means states and territories.
	The state based analysis by industry does not include net ownership of dwellings. The industry shares and industry contributions to compound average annual growth rates of net capital stock are based on each state’s total net capital stock less ownership of dwellings.

Net capital stock was relatively smaller in South Australia ($335.7 billion), the Northern Territory ($117.0 billion), the Australian Capital Territory ($105.7 billion) and Tasmania ($89.9 billion). The Northern Territory's net capital stock overtook that of Tasmania in 2012-13 and that of the Australian Capital Territory in 2013-14. The Northern Territory now has the sixth largest net capital stock in Australia, servicing the smallest State population.

State		Net capital stock	Share (a)	Growth in Net capital stock (b)	Growth in Gross state product (b) (c)
		$billion	%	%	%
New South Wales		1,644.30	28.5	5.3	5.2
Victoria		1,283.80	22.2	5.6	5.2
Queensland		1,248.00	21.6	6.8	6.5
South Australia		335.7	5.8	4.6	4.5
Western Australia		948.2	16.4	7.4	7.1
Tasmania		89.9	1.6	3.9	4.5
Northern Territory		117	2	7	6.8
Australian Capital Territory		105.7	1.8	5.5	6
(a) Share of Australia's total net capital stock
(b) Compound annual growth rate from 1989-90 to 2016-17
(c) Source: Australian National Accounts: State Accounts (cat. no. 5220.0)

Over the period from 1989-90 to 2016-17, compound annual growth of net capital stock has been the strongest in Western Australia (7.4%), the Northern Territory (7.0%) and Queensland (6.8%), which have all experienced significant investment in mining infrastructure in recent years. Tasmania (3.9%) and South Australia (4.6%) recorded the weakest average annual growth in net capital stock over the same period.


STATE BASED ANALYSIS BY INDUSTRY

New South Wales

In 2016-17, the industry with the largest net capital stock in New South Wales was the Transport, postal and warehousing industry with $145.1 billion. This was followed by the Electricity, gas, water and waste services ($101.5 billion), Rental, hiring and real estate services ($98.8 billion) and Mining ($72.4 billion) industries. Collectively, these four capital intensive industries made up 44.7% of total net capital stock in New South Wales.



Victoria

In 2016-17, the industry with the largest net capital stock in Victoria was the Electricity, gas, water and waste services ($103.4 billion), followed by Transport, postal and warehousing ($77.1 billion), Rental, hiring and real estate services ($61.3 billion) and Public administration and safety ($54.2 billion). Collectively these four industries comprised 43.0% of total net capital stock in Victoria.



Queensland

In Queensland, the Mining industry has the largest net capital stock of all industries in 2016-17 with $240.7 billion, which is more than double that of the second largest industry, Transport, postal and warehousing, with $118.6 billion. The next largest industries are Public administration and safety ($68.4 billion) and Electricity, gas, water and waste services ($65.9 billion), which are both approximately one-quarter of the size of the Mining industry's net capital stock in Queensland.



South Australia

In South Australia, the industries with the largest net capital stock in 2016-17 are particularly capital intensive industries; Mining ($33.5 billion), Electricity, gas, water and waste services ($29.0 billion) and Transport, postal and warehousing ($21.4 billion). These three industries comprised 16.7%, 14.5% and 10.7% respectively of South Australia's total net capital stock.



Western Australia

Western Australia's capital base is dominated by the Mining industry ($423.4 billion), which made up 61.7% of the state's total net capital stock in 2016-17. This is the culmination of significant capital investment over the past decade, driven by historically high commodity prices. High levels of investment has seen the net capital stock of the mining industry in Western Australia expand by 3.9 times over the past 10 years. The next largest industries in Western Australia were Transport, postal and warehousing ($45.2 billion) and Electricity, gas, water and waste services ($37.0 billion).




Tasmania

Net capital stock of the Electricity, gas, water and waste services ($9.0 billion) and Transport, postal and warehousing industries ($6.1 billion) were the largest in Tasmania in 2016-17. These capital intensive industries comprised 17.2% and 11.7% respectively of Tasmania's total net capital stock. The next largest industries were Public administration and safety ($4.9 billion) and Mining ($4.4 billion).



Northern Territory

Similar to Western Australia, the capital base in the Northern Territory is dominated by the Mining and Manufacturing industries. Net capital stock of the Mining and Manufacturing industries in the Northern Territory in 2016-17 was $59.8 billion, accounting for 63.6% of the State’s total net capital stock. The next largest industries are Public administration and safety ($7.3 billion) and Transport, postal and warehousing ($6.6 billion).



Australian Capital Territory

In the Australian Capital Territory, net capital stock was largest in the Public administration and safety ($14.2 billion), Information, Media and Telecommunications ($5.7 billion), and Transport, Postal and Warehousing ($5.0 billion) industries in 2016-17. Public administration and safety made up 23.1% of the Australian Capital Territory’s net capital stock. The strong contribution of this industry to the Australian Capital Territory’s capital base reflects national capital governance activities.



INDUSTRY BASED ANALYSIS BY STATE (SELECTED INDUSTRIES)

Mining

An examination of mining net capital stock for each State further highlights the fact that Western Australia, Queensland, New South Wales and the Northern Territory dominate the capital base for this industry.

In 2016-17, these four states account for 90.1% of the Mining industry’s national net capital stock, with Western Australia accounting for 48.0% of Mining’s net capital stock alone. This is a direct result of the recent ‘boom’ in mining construction, spurred on by high commodity prices, with much of the construction centred in Western Australia. Recent mining investment in the Northern Territory has seen net capital stock of its Mining and Manufacturing industries surpass the net capital stock of the Mining industry in Victoria. With gross fixed capital formation returning to pre-boom levels in Western Australia and Queensland, particularly as the construction of some large projects reach completion, there is an expectation that growth in mining net capital stock in these states will begin to slow.

Manufacturing

The net capital stock of the Manufacturing industry has plateaued in recent years, and has now begun to decline, having fallen in each of the last two years. This aligns with the reorientation of the Australian economy towards provision of services, a process which has accelerated in recent years due to an elevated currency which has made it more difficult for Australian manufacturing exports to compete internationally.
Manufacturing’s net capital stock fell in every state in 2016-17. Victoria’s manufacturing base is the largest of any state, but it appears to be in secular decline, having fallen in 6 of the last 8 years. South Australia’s manufacturing net capital stock has now fallen for the last 5 years.





Electricity, gas, water and waste services

Concerns about energy security have driven heavy investment in the capital base of the Electricity, gas, water and waste services industry over the past decade, as can be seen in the graph below. Victoria’s capital base for this industry has recently exceeded that of New South Wales.





Net capital stock and population growth

Australia’s capital stock has grown at a healthy pace over the period from 1989-90 to 2016-17, but the rate at which it has expanded in each State relative to its population growth highlights some noticeable divergences.
Over the past 10 years, the population of the Northern Territory increased by 1.4% on average each year, while its capital base expanded by 7.9% each year on average over the same period. The Western Australian population grew by 2.0% on average each year over the past decade while its net capital stock grew by 8.3% each year. Both of these States have experienced elevated levels of construction activity in the Mining industry.
At the other end of the spectrum, New South Wales’ net capital stock grew by 4.1% on average each year compared to average annual population growth of 1.3%, and Victoria saw its net capital stock grow on average by 4.8% each year, while its population grew by 1.9% on average each year.