At almost 700 billion dollars, New South Wales is Australia’s largest state economy, accounting for around a third of the nation’s economic output and home to nearly a third of Australians.
The combined impact of natural disasters, COVID-19 and measures to suppress its spread have had a significant impact on economic activity over the last few years. The NSW economy, as measured by Gross State Product (GSP), contracted for the first time in recorded history in 2019-20, but has since bounced back to lift 3.8 per cent higher than pre-COVID levels in 2021-22. The post-lockdown economic momentum continued through the September quarter 2022 with NSW state final demand (SFD) rising by 0.7 per cent – the second strongest result among the states. The NSW population currently stands at 8.2 million people and has grown at an average of 1.1 per cent per year over the last 30 years.
The NSW population grew at an above-average pace in the seven years preceding the pandemic, driven primarily by net overseas migration. However, the closure of international borders during the pandemic led to NSW seeing a net outflow in overseas migration for the first time since 2000, causing a significant moderation in population growth. The relaxation of international travel restrictions from late 2021 has since supported a substantial recovery in the level of net overseas migration.
Service driven economy
New South Wales has a diversified, service-driven economy with a relatively lower exposure to commodity prices compared to the mining states of Western Australia and Queensland. Over the past two decades, the services share of the state economy has gradually lifted to account for around 75 per cent of economic activity and more than 90 per cent of employment.
New South Wales has a comparative strength in the provision of business services which, in aggregate, has grown to account for 30 per cent of GSP. This includes industries such as financial services, professional, scientific and technical services, property services, information media and telecommunications as well as administrative and support services. The construction and health industries also account for large shares of the state’s economic activity.
The largest industries in New South Wales, by employment, are health and social care, professional, scientific and technical services, retail trade, construction and education. Together these industries account for over half of all employment in the state.
New South Wales has the largest labour force in the nation with almost 4.5 million people either employed or seeking employment. In November 2022, over two-thirds (66.7 per cent) of the state’s population were participating in the labour force – the highest monthly proportion on record. This reflects a strong recovery from the pandemic-driven declines that saw sharp falls in the labour force participation rate in 2020 and 2021. The recovery of the state’s labour force participation rate has been supported by the long-term trend of increasing participation in the labour market by women. The labour market has tightened considerably through 2022, with the unemployment rate falling to 3 per cent in October 2022, which was the lowest unemployment rate recorded for New South Wales since 1974.
New South Wales has a diverse export base of manufactured goods, natural resources and services. The state has historically been a net importer of goods and a net exporter of services. Major merchandise exports include coal, beef, gold and aluminium. The primary export destinations for goods are Japan, Taiwan and South Korea, while the major suppliers of imported goods are China, the United States and South Korea.
Tourism and international education exports accounted for around half of the state’s service exports in the decade prior to the pandemic. Travel restrictions through the pandemic significantly constrained these exports, reducing the export share of these services to around a quarter of the state’s total service exports. Tourism was particularly affected by the pandemic, as exports fell by 97 per cent between 2019-20 and 2020-21. As border restrictions for travellers have now been removed, there has been a substantial pickup in overseas arrivals over the year to October 2022, but the level of arrivals remains below pre-pandemic levels.
Last updated: 16/01/2023