... consistent with the the national approach to economic, environmental and social stewardship.

Victorian Economic Outlook

In 2011-12 Victoria had a Gross State Product (GSP) of $ 328.6 billion, approximately 22 per cent of Australian Gross Domestic Product1.  This is the second largest GSP in Australia behind NSW.   The economy grew at 2.5 per cent per annum to 2010-11 (slightly above for Australia as a whole), however with a forecast growth of only 1.75 per cent for 2012-122.

Victoria’s GSP per capita over 2011-12 was $58,106, better only than South Australia and Tasmania3.  The manufacturing industry, traditionally the largest single element of the Victorian economy, is in decline. This has been driven by a number of international and domestic influences that have decreased the competitiveness of Australian manufacturing both domestically and internationally.  The services sector has also grown substantially, with a focus on professional, scientific and technical services.  In recent years public sector employment had undergone a significant expansion.  The public service workforce had expanded by 12 per cent from 2006-07 to 2010-11.

Figure 1: Victorian Public Service workforce growth 2006-07 to 2010-11 (ex-hospitals, teachers, police etc)4

This increase in public service employees has contributed to government expenditure growth outpacing revenue, thus creating a structural operational deficit for the State Government and an unsustainable budget.  Government has recently been working to redress this through productivity increases and reductions in non-frontline staff, the result of which can be seen in the decrease in public service employee numbers between 2010-11 and 2011-12.

Table 1: Recent economic indicators5

  2010-11 2011-12
Estimated resident population (March): 5,520,541 5,603,077
Real Gross State Product growth (%): 2.7 2.3
Real GSP per head growth (%): 1.3 0.8
GSP (current prices)): $315,571m $328,595m
Proportion of Australian GDP (%): 22.5 22.3
Change in real final demand (%): 3.7 2.2
Unemployment rate (%): 4.5 5.3

In terms of GSP, the Victorian economy is highly diversified.  The industries that contributed the most to Victoria’s gross product in 2010-11 in volume terms were6: - Financial and insurance services 11.3 per cent; Manufacturing 9.2 per cent; Professional, scientific and technical services 7.9 per cent; Ownership of dwellings 7.8 per cent; and Construction 6.6 per cent. Mining represented only 2.3 per cent of the State’s economic activity declining from 3.3 percent in 2002-03.

Figure 2: Victorian economy by industry7

The total gross value added (GVA) of the mining industry to Victoria is $7.1billion8.  It is also one of the smallest industries in the State with regards to employment and it is at risk of further decline through restrictions on land access, reduced investment, regulatory uncertainty and population density.

The education sector is a major employer and has been highly successful in recent years by attracting many overseas students and bringing foreign investment into the Victorian economy.  It is thus a significant export earner, but it too is losing momentum for a number of reasons including the high value of the Australian dollar, and the strong growth of other institutions in Asia and elsewhere in Australia, especially in Western Australia, Queensland and South Australia.  The latter are all building education and skills centres focused on resource development and technology training.

The banking, finance and legal services industries are very strong in Melbourne and are continuing to grow on the back of foreign investment in Australian industry and especially in the mineral, energy and agricultural resource sectors, as well as in urban real estate.

Farm production (agriculture) in Victoria represents an industry gross value added of $7.7 billion, a relatively small percentage of GSP and direct employment, however it accounts for over a quarter of Australia’s national agricultural production9. This production involves the use of about 60 per cent of the State area (136,000sqkm) and is presently occupied by an ageing work force.

Victoria’s export goods trade is dominated by wool, aluminium, cars and agricultural products. Export services are predominantly education services for foreign students, and tourism.  Despite the State’s mineral wealth, minerals play a minor role in the State’s trade balance.

Table 2: Victoria's trade 2011-1210

Major exports $m       Major imports $m    
Wool & other animal hair (incl. tops)   1,443   Passenger motor vehicles   4,953
Wheat   1,121   Refined petroleum   2,825
Aluminium   1,070   Goods vehicles   1,527
Milk, cream, whey & yoghurt   1,060   Vehicle parts & accessories   1,480
Refined petroleum   934   Medicaments (incl. veterinary)   1,149
Meat (excl beef)   780   Telecom equipment & parts   1,137
Cheese & curd   616   Computers   1,065
Beef   594   Prams, toys, games & sporting goods   965
Edible products & preparations   539   Furniture, mattresses & cushions   938
 
Major export destinations $m %   Major import sources $m %
China 3,613 16.7   China 12,128 20.3
New Zealand 1,961 9.1   United States 7,125  
Japan       Japan    
United States       Germany    
Singapore       Singapore 3,113 5.2
 

Services trade

           
Major exports $m %   Major import $m %
Education-related travel 4,448 36.3   Personal travel excl. education 5,466 37.5
Personal travel excl. education 2,530 20.7   Freight transport 2,455 16.8
Business-related travel 806 6.6   Passenger transport 1,610 11.0

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1 ABS – 5220.0 - Australian National Accounts: State Accounts, 2011-12.
2 2012-13 Victorian Budget papers.
3 ABS – 5220.0
4 State Services Authority, The State of the Public Sector in Victoria Report, Data compiled from the 2006-07 to 2011-12 annual reports.
5 DFAT: Victorian Fact Sheet, compiled by the Market Information and Research Section DFAT based on DFAT STARS database and ABS Catalogue Nos 6291.0.55.003, 5220.0, 3101.0 and 5368.0. December 2012.
6 Industry contribution to GSP is calculated by the ABS by combining compensation of employees and the gross operating surplus and gross mixed income of the industry.
7 ABS – 5220.0
8 ABS – 5220.0 – GVA defined by the ABS is the value of output at basic prices minus the value of intermediate consumption at purchasers' prices. Basic prices valuation of output removes the distortion caused by variations in the incidence of commodity taxes and subsidies across the output of individual industries.
9 ABS – 1301.0 - Year Book Australia, 2012, Agricultural Production
10 DFAT: Victorian Fact Sheet, compiled by the Market Information and Research Section DFAT based on DFAT STARS database and ABS Catalogue Nos 6291.0.55.003, 5220.0, 3101.0 and 5368.0. December 2012.