Fascinating

One of the things on the endless list of COVID fascinations is how for the first time in 23+ years WA state demand has been moving almost in lockstep with all the states and territories in Australia, just like Fred and Ginger.

It means that no matter how our politicians seek to manage the pandemic (or not) or where the natural resources are, the growth in consumption and investment across each square kilometre of the country is the same wherever you are.

Only the present and future health outcomes are different.

Check out the lines below and you’ll notice that for 2021, WA consumption and investment demand (orange line) was in lockstep with the rest of Australia (black line).

This is a first. Usually, WA’s lines are so far out of kilter because of commodity prices and their influence on the rest of our state export economy.

But despite exports increasing over the period, if you take the colours away it all looks like one line.

Notably, pandemic central states like NSW and Vic have been more volatile than the rest since early 2020. That’s also a first and a function of how Andrews and Berejiklian approached their COVID early response.

So, what is State Final Demand?

It’s a measure of total consumption and investment by households and Governments, and a proxy for growth.

It can be used to determine the clip at which the country has grown, and geographically where the engines of that growth are located and where it might be wise to build, invest and/or focus.

It includes private consumption (good and services), private investment (housing, machinery, equipment, projects, etc), public consumption (government) and public investment (infrastructure, defence, etc).

Despite disparate and unequal rolling lockdowns, reliance on different supply chains, restricted construction activities in some states and a disproportionate natural resources endowment in two states as well as very different vaccine roll outs (and pandemic responses), we’re pretty much in lockstep!

That’s a first for WA, but probably not the last ‘great leveller’ outcome we will see from COVID.

It also means our state government needs to think very carefully about how it manages things going forward, given the orange line should not be in lockstep at this point given the energy transition and commodity cycle.

If there are any pats on the backs going on at Parliament House, they’re premature.

Now what?

I’m looking forward to seeing if, when and by how much these lines diverge in 2022. It will tell us where the growth engine is and who (or what) is driving it.

See you in the market.

Mike