2     Tasmanian Economy

Key Issues

·       Tasmania has been successful in managing the public health risk of the COVID‑19 pandemic, and economic outcomes have been better than expected. However, the pandemic continues to disrupt global economic activity with uncertainty around the evolution of the pandemic remaining.

·       The recovery from the COVID‑19 pandemic in both Tasmania and at a national level has been strongly supported by a number of fiscal and monetary policy measures.

·       Tasmania had experienced strong economic conditions prior to the onset of the pandemic and this, alongside the State’s successful management of the virus, meant that the Tasmanian economy grew by 0.3 per cent in 2019‑20, in contrast to the economic contractions experienced by most other states and the national economy.

·       The Tasmanian economy is expected to have grown by two per cent in 2020‑21, close to the long‑term average. The continued recovery is expected to drive growth in the Tasmanian economy of four per cent in 2021‑22, on the back of strong growth in household consumption and government expenditure, before moderating to growth of two per cent in 2022‑23.

·       Tasmania’s successful containment of the virus has also meant that the labour market has recovered strongly since the height of the pandemic in Tasmania in May 2020. In June 2021, employment was above its pre‑pandemic record high and the continuing recovery in the broader economy means that employment is expected to grow strongly in 2021‑22 at two per cent, and then at its long‑term average over the Forward Estimates. Given the strong economic recovery, increased employment of around 8 000 persons in year-average terms over the two-year forecast period to June 2023 would be consistent with these forecasts.

·       Labour force participation is forecast to remain high over the next few years and the year‑average unemployment rate is expected to be around 5½ per cent in both 2021‑22 and 2022‑23.

·       Recent COVID‑19 outbreaks in other Australian jurisdictions have highlighted that the public health risk of the virus remains present. The continuation of the vaccine rollout in Australia is expected to reduce this risk, supporting the economic recovery and boosting confidence. It will also provide a pathway for the reopening of Australia’s international border, facilitating the return of temporary and permanent international migration to Tasmania.

·       The outlook for the Tasmanian economy is positive, but material risks remain. The evolution of the COVID‑19 pandemic, both globally and in Australia, is highly uncertain and is the key risk to the economic forecasts. The recovery path of the State’s economy over the forecast period will continue to be highly dependent on the successful management of the virus.


Economic Outlook

The COVID‑19 pandemic has had a profound impact on the global economy. It is estimated that in 2020 the world experienced the greatest decline in economic activity since the Great Depression. Although it is now well over a year since the outbreak of the virus was declared a pandemic by the World Health Organization, and the rollout of vaccines has begun throughout the world, the public health crisis continues to evolve and impact global economic activity.

Over the past year, Australia has managed the pandemic with relative success. Outbreaks of the virus have generally been well contained and borders between states and territories have largely remained open. Reflecting this success, economic activity has recovered quicker than expected with the outlook over the next few years more positive. While Australia is in the early stages of its vaccine rollout, it is expected that this will continue to support the economic recovery and boost confidence.

The successful management of the virus in Tasmania has allowed for the easing of many activity restrictions and the reopening of the State’s borders with other states and territories, with closures occurring only in response to specific outbreaks in other jurisdictions.

The recovery from the COVID‑19 pandemic in both Tasmania and at a national level has been strongly supported by a number of fiscal and monetary policy measures. These measures have included significant income support measures for households, cash flow support for businesses and targeted, industry specific, schemes. The largest of these measures, the JobKeeper Payment program, assisted people to maintain relationships with employers when the impacts of the pandemic meant many would have otherwise lost their employment. This program, alongside other fiscal and monetary supports, boosted incomes and strengthened household balance sheets, leading to a strong recovery in domestic consumption as restrictions have eased.

The Tasmanian Government’s Social and Economic Support packages, valued at over $1 billion, were unprecedented in scale and have played a major role in supporting Tasmanian households and businesses. Infrastructure investment, at both a State and national level, has also supported jobs and stimulated economic activity over the past year. Historically low interest rates, alongside the Australian and Tasmanian HomeBuilder programs, have provided a significant boost to the residential construction sector.

While some support measures, including the JobKeeper Payment program, have since concluded, it is expected that fiscal and monetary support measures will continue to play an important role in supporting the recovery of the Australian economy for a number of years.

Notwithstanding the recovery experienced to date, the virus continues to present an ongoing threat to the global and domestic economies. Uncertainty regarding the evolution of the pandemic, and the associated public health responses, remains the key risk to the forecasts. The recent outbreaks in other Australian jurisdictions have highlighted the risk that the pandemic continues to pose.


Global and National Economic Environment

Globally, the economic recovery from the pandemic is underway, with strong growth expected over the next two years. The global recovery has been underpinned by the rollout of vaccines supporting the easing of restrictions and lifting consumer and business sentiment, particularly in large economies like the United States of America and China. Alongside global economies reopening, fiscal and monetary policy measures have also provided significant support to the recovery. In its July 2021 World Economic Outlook Update, the International Monetary Fund forecast that following an estimated contraction of 3.2 per cent in 2020, the global economy will grow at six per cent in 2021, before moderating to 4.9 per cent in 2022.

However, the speed and timing of recovery is divergent across countries, reflecting each country’s success in managing the virus and the policy support provided. Some countries have vaccinated significant proportions of their populations and have eased many public health measures. In some cases, increasing rates of infection are being experienced and have necessitated the reintroduction of restrictions.

Following its first recession in almost 30 years, the Australian economy has recovered strongly since the middle of last year and, by the March quarter 2021, was estimated to be 0.8 per cent larger than its pre‑pandemic level at the end of 2019. The national labour market has also improved markedly in the past year, exceeding earlier forecasts. Employment in June 2021 was around one per cent above the level recorded in March 2020 and the national unemployment rate has fallen sharply in recent months to be at its lowest level in 10 years, at 4.9 per cent in June 2021.

The Australian Government released its 2021‑22 Budget on 11 May 2021. Reflecting the strengthened outlook for the economy, the Australian Treasury expected real gross domestic product to grow by 1¼ per cent in 2020‑21, improving from the contraction of 1½ per cent forecast at the time of the 2020‑21 Australian Budget. The Australian Treasury forecast that the economy would grow strongly in 2021‑22 at 4¼ per cent, before moderating to 2½ per cent in 2022‑23.

At the time of the 2021‑22 Australian Budget, the Australian Treasury expected that economic growth would lead to sustained growth in employment over the forecast period. Tighter labour market conditions were expected to mean that national wage growth would rise above two per cent in 2022‑23.

Australia’s population was expected to grow by 0.1 per cent in 2020‑21 and 0.2 per cent in 2021‑22, reflecting the impact of international travel restrictions on overseas migration to Australia. With the Australian Government expecting migration to Australia to gradually return from mid‑2022, the population was forecast to grow by 0.8 per cent in 2022‑23.

Recent Performance, Estimates and Forecasts of the Tasmanian Economy

This chapter presents Treasury’s estimates for key Tasmanian economic indicators for the 2020‑21 financial year, forecasts for 2021‑22 and 2022‑23 and projections for 2023‑24 and 2024‑25. The projections differ from forecasts in that they are based on the long‑term average growth rate of the economic indicators or, in the case of the unemployment and participation rates, reflect the expected rate of the indicator for 2022‑23. There is still a level of uncertainty regarding the performance of the economy after 2022‑23 and the potential for unforeseen events to affect the recovery path. Therefore, it is considered that it is appropriate to provide projections for the final two years of the Forward Estimates. This approach is relatively common across Australian jurisdictions.


Table 2.1:         Estimates, Forecasts and Projections




Budget 2021‑22












Revised Estimates



Gross state product (real, % change)1






State final demand (real, % change)1




Employment (year‑average, % change)2,3








Labour force participation rate (year‑average, %)2,3








Unemployment rate (year‑average, %)2,3




Consumer Price Index

(year‑average, % change)3,4





Population (year‑average, % change)5
















Source: Actual ‑ Australian Bureau of Statistics; Estimates, forecasts and projections ‑ Treasury.


1.    State final demand actual is an ABS estimate calculated using March quarter 2021 National Accounts data, while gross state product is calculated using annual ABS State Accounts data.

2.    Labour force actuals are ABS estimates calculated using June 2021 data.

3.    Actual for 2020‑21.

4.    Consumer Price Index actuals are ABS estimates calculated using June quarter 2021 data.

5.    Population actual is an ABS estimate calculated using December quarter 2020 data.

6.    The projections are not forecasts, but are based on the long‑term averages for the economic indicators. In the case of the labour market, the projections of employment growth reflect the long‑term trend. The projections for the unemployment rate and the participation rate are developed using prevailing rates, projected increases in the working age population, projected employment growth and the historic relationship between employment and labour market participation.


The economic estimates and forecasts presented in the table above rely heavily on official data produced by the Australian Bureau of Statistics. As a small jurisdiction, some of the key data for Tasmania are more volatile and less reliable than for the larger states, including data relating to the labour force and gross state product and its components. Data are also subject to revision, which can have a greater impact for smaller jurisdictions.

The estimates and forecasts included in this chapter use a number of assumptions and judgements that are based on information available at the time of preparation and are inherently uncertain and subject to change, particularly in the current environment. While events or changes to policy settings occurring after the finalisation of these estimates and forecasts may affect the likelihood of some of the underlying assumptions, it is not possible to reflect the impact of such events in the information presented in this chapter.

The estimates and forecasts presented were developed assuming that Tasmania continues to experience favourable outcomes in relation to virus containment and that outbreaks in other jurisdictions are effectively contained and relatively short‑lived. It was assumed that there are no extended or sustained State border restrictions that materially impact the Tasmanian economy over the forecast period, especially over the tourism high season. It was also assumed that the vaccine rollout in both Australia and internationally continues to progress and is effective, facilitating a return of temporary and permanent migration to Australia, commencing in mid‑2022.

Economic Activity

The Tasmanian economy experienced a significant shock in 2019‑20. The growth that was experienced through the first three quarters of 2019‑20 was largely unwound in the final quarter following the onset of the COVID‑19 pandemic. Overall, Tasmania’s economy grew by 0.3 per cent in 2019‑20. This growth was in contrast to the national economy and most other jurisdictions, with Western Australia the only other state to record positive growth in 2019‑20. Tasmania’s performance over 2019‑20 reflected the strong economic conditions in the State prior to the onset of COVID‑19 and the State’s successful management of the virus relative to other states (Chart 2.1). In the three years prior to the pandemic, the State experienced sustained growth and was one of the strongest performing economies in the country, a trend which is expected to continue over the forecast period.

Chart 2.1:         Gross State Product1

Title: Gross State Product - Description: The chart shows the GSP of all four states increases from 2016-17 to 2018-19 before dipping and rising again during 2020-21 and over the following years. Victoria’s GSP takes a larger dip and lasts longer than the other states’.

Source: Actual ‑ Australian National Accounts: State Accounts, ABS; Estimates and forecasts ‑ 2021‑22 jurisdictional Budget papers.


1.    Only states that have released their 2021‑22 Budgets have been included in the chart.


The Tasmanian economy has recovered strongly through the first three quarters of 2020‑21. High levels of fiscal and monetary stimulus have strengthened balance sheets and seen consumer confidence recover faster than expected, driving growth in household consumption. Alongside elevated government expenditure, private investment has also contributed to the recovery, as stimulus measures have driven growth in dwelling and business investment. It is expected that this growth in state final demand will be partially offset by low levels of international services exports due to ongoing international border closures. It is estimated that the Tasmanian economy grew by two per cent in 2020‑21, close to the long‑term average.

Household consumption is expected to grow through each of the four quarters in 2021‑22, as it is assumed that virus containment measures remain effective and consumer confidence continues to improve. This will see consumers continuing to return to their pre‑COVID‑19 domestic spending behaviours and will also lead to an increase in interstate travel, which will positively impact consumption. Through 2022‑23, household consumption is again forecast to grow consistently, as the gradual recovery in international tourism and overseas migration is expected to support consumption in the State. The strong growth in household consumption in Tasmania over the forecast period is also expected at a national level.

Following recent elevated levels, private investment is forecast to decrease in 2021‑22, largely driven by a decline in business investment. This decline is expected to be partially offset by sustained high levels of dwelling investment through 2021‑22, reflecting that a significant number of dwellings will continue to be constructed due to the Australian and Tasmanian HomeBuilder programs. It is expected that the increased $30 000 Tasmanian First Home Owner Grant in 2021‑22 will also support dwelling investment. Alongside the HomeBuilder programs, highly supportive monetary conditions and high demand for housing have seen house prices in the State rise through the pandemic, following already strong price growth in recent years. Private investment is forecast to decline a little in 2022‑23, largely due to lower business investment over the year relative to 2021‑22. Dwelling investment is expected to remain elevated throughout 2022‑23, supported by the pipeline of work that has built up in the residential construction sector.

Government expenditure is expected to grow strongly through 2021‑22, partly driven by growth in general government and other government investment. This is due to the expectation that substantial progress will be made on a number of significant capital projects over this period. It is expected that government expenditure will continue to grow strongly again through 2022‑23, but that this will be primarily driven by growth in other government investment, reflecting a number of significant projects in that sector, including the purchase of the new TT‑Line vessels.

International exports are forecast to make a positive contribution to gross state product over the forecast period, with merchandise exports expected to grow in line with recent trends. Services exports are forecast to remain at low levels through 2021‑22, reflecting the impact of ongoing international border closures on the State’s tourism and education sectors, although it is expected that some international students may begin to return to the State through the year. With the expected reopening of Australia’s international border in mid‑2022, Tasmanian services exports are forecast to grow in 2022‑23, reflecting the expected return of international tourists and increased international students.

Overall, these factors are forecast to mean that the Tasmanian economy will grow strongly by four per cent in 2021‑22, before moderating to grow by two per cent in 2022‑23.

Labour Market

Over the past year, Tasmania’s labour market has rebounded strongly from the impacts of the COVID‑19 pandemic, surpassing earlier forecasts. Since May 2020, over 22 000 persons have obtained employment and it was estimated that there were 262 200 persons employed in Tasmania in June 2021, the highest level on record (Chart 2.2). Tasmanian job vacancies, a forward‑looking labour demand indicator, are at a series high, suggesting strong future demand for labour in the State.

Chart 2.2:         Tasmanian Employment

Title: Tasmanian Employment - Description: The chart shows that Tasmanian employment had increased from mid-2019 to reach a series high in February 2020. Employment decreased sharply between March and May 2020 and then grew strongly between May and June 2021.

Source: Labour Force, Australia, ABS.


In March 2021, a number of significant fiscal stimulus measures that provided support to the labour market through the pandemic concluded, including the JobKeeper Payment program and the JobSeeker Coronavirus Supplement. Available labour force data indicate that the conclusion of the program has had little impact on employment levels.

Following above average growth in 2019‑20, it is estimated that Tasmanian employment grew by 1.7 per cent in year‑average terms in 2020‑21, reflecting the strong recovery in the labour market since the height of the pandemic.

Strong labour market conditions have also seen the headline unemployment rate fall from its pandemic peak of 7.9 per cent in October 2020 to 4.5 per cent in June 2021. However, in year‑average terms, the unemployment rate in 2020‑21 is estimated to have been 6.4 per cent, reflecting the temporary spike in unemployment experienced in late 2020.

Labour force participation has returned to around its pre‑pandemic level, again reflecting better than forecast outcomes. In year‑average terms, the participation rate is estimated to have been 61.2 per cent in 2020‑21.

Employment is forecast to remain broadly unchanged through the first half of 2021‑22, reflecting the strong growth that has been experienced in recent months. Through the latter half of the year, it is assumed that there will be a gradual return of international students to Tasmania and this is expected to provide a boost to employment growth. In year‑average terms, these factors, alongside a relatively low 2020‑21 year‑average employment level, are forecast to drive employment growth of two per cent for 2021‑22.

In 2021‑22, the participation rate is expected to rise gradually throughout the year and is forecast to be 61½ per cent in year‑average terms. This forecast reflects that the recovery in the Tasmanian labour market since mid‑2020 has seen the participation rate already rise to a level that is around one percentage point above its long‑term average.

The unemployment rate is forecast to fluctuate a little over the course of 2021‑22 and, in year‑average terms, is expected to be 5½ per cent, close to three percentage points below the 8¼ per cent forecast for 2021‑22 at the time of the 2020‑21 Budget.

Through the first half of 2022‑23, the return of international visitors and overseas migrants to Tasmania is expected to drive strong employment growth in the State, with growth easing to around its long‑term average in the second half of the year. In year‑average terms, these factors are forecast to drive employment growth of one per cent for 2022‑23, in line with the long‑term growth rate of employment in Tasmania. These strong labour market conditions are expected to maintain the participation rate at 61½ per cent in 2022‑23, with the unemployment rate also forecast to be steady at 5½ per cent in year‑average terms over that period.

Given the strong recovery in the labour market, employment is expected to increase by around 8 000 persons over the two-year forecast period, in year-average terms, with further employment growth projected over the remainder of the Forward Estimates.


Following a large decline in the June quarter 2020, Hobart’s inflation has risen over the past year, consistent with the national increase. This growth in prices partly reflects the conclusion of temporary COVID‑19 policy measures that saw the removal of child care fees and some school levies for parts of 2020 and the recovery in petrol prices, which are now around their pre‑pandemic levels. In year‑average terms, Hobart’s Consumer Price Index is estimated to have grown by 1.8 per cent in 2020‑21.

Reflecting strong recent price growth, Hobart’s CPI is expected to grow relatively strongly in 2021‑22 at 2½ per cent in year-average terms, before moderating slightly to two per cent in 2022‑23, reflecting broadly improving economic conditions and sentiment. These forecasts are consistent with the Reserve Bank of Australia’s forecasts for national CPI, with inflation expected to be at the lower end of the RBA’s target range in mid‑2023. Nominal wages growth, which has consistently fallen over a number of years at both a State and national level, is also expected to improve over the forecast period, as tighter labour market conditions put upward pressure on wages.


Tasmania continued to experience strong population growth in 2019‑20. In year‑average terms, Tasmania’s population increased by 1.2 per cent during this period, around double the long‑term average and similar to the growth levels experienced in the previous two years. Net overseas migration was the primary driver of Tasmania’s population growth in 2019‑20, with the State experiencing significant inflows in the first three quarters of the year, including an all‑time high in the December quarter 2019.

The closure of Australia’s international border due to the pandemic has severely disrupted migration to Australia. Over the first two quarters of 2020‑21, Tasmania recorded negative net overseas migration, while net interstate migration has also been lower than in recent years. Reflecting these factors, in year‑average terms, Tasmania’s population is estimated to have grown by 0.6 per cent in 2020‑21, in line with the long‑term average (Chart 2.3).

Tasmania’s population is forecast to grow by 0.5 per cent in 2021‑22 in year‑average terms, below the long‑term average. This is due to continuing low levels of net overseas migration as international borders are expected to remain largely closed over the year, consistent with the assumptions of the Australian Government at the time of the 2021‑22 Australian Budget.

The assumed reopening of Australia’s international border in mid‑2022 is expected to provide a boost to population growth in Tasmania as international migration returns to the State. In year‑average terms, Tasmania’s population is forecast to increase by 0.6 per cent in 2022‑23, in line with the long‑term average.

Chart 2.3:         Tasmanian Population Change

Title: Tasmanian Population Change - Description: The chart shows that the Tasmanian population increased from June 2005 to June 2008, then fell until 2012, after which it grew until 2018. Population fell sharply during 2020 and is estimated to grow during 2021 and 2022.

Source: Actual ‑ National, state and territory population, ABS; Estimates and forecasts ‑ Treasury.


Risks to the Outlook

The evolution of the COVID‑19 pandemic remains the key risk to the outlook for the Tasmanian economy. While the State has experienced success in managing the virus, outbreaks that require the reintroduction of restrictions on activity in the State could occur, and these would adversely affect economic activity and employment. Sustained outbreaks in other jurisdictions may also necessitate the extended closure of Tasmania’s border with other jurisdictions. Alongside the direct impacts of such events, the possibility of further outbreaks may weigh on business and consumer confidence. This could lead to consumption or investment being deferred, dampening the economic recovery.

An extended delay in the rollout of vaccines, either in Australia or globally, will mean that the virus will continue to pose a public health risk, as will the possibility that existing vaccines do not prove effective against new strains of the virus. Either of these risks could mean the reopening of Australia’s international border is delayed and this would have consequences for the expected return of international migration and tourism to Tasmania. On the upside, if the vaccine rollout is quicker and more effective than anticipated, this would be expected to boost activity and confidence in the economy, and possibly accelerate the return of international migration and tourism to Tasmania. The continued development of new and more effective treatments for patients with COVID‑19 may also lead to improvements in activity and confidence.

The future reopening of Australia’s border also comes with the risk that local expenditure, including intrastate travel in Tasmania, may decline as Tasmanians recommence international travel.

A secondary effect of the pandemic has been the impact of restrictions on the movement of labour and goods in both Australia and throughout the world. Restrictions on individual travel and border closures due to the pandemic have constrained the supply of skilled or specialised labour into Australia and Tasmania. The movement of goods into Australia has also been affected by supply chain disruptions, which have been the result of issues both with the production and transportation of goods. In some sectors, including the construction sector, these supply issues have been compounded by strong increases in demand for inputs and goods. Going forward, there is a risk that these constraints may persist and that this could inhibit the economic recovery through delaying both public and private infrastructure projects, the construction of dwellings and other buildings, and the general, day‑to‑day operations of businesses.

Ongoing global trade tensions also present a risk to the outlook. In particular, Australia’s trade relationship with China has deteriorated in recent years, with China imposing tariffs and other trade barriers on a number of Australian exports. Although this has to date affected only a very small share of Tasmanian exports, there is a risk of further barriers being imposed.

Since the onset of the pandemic, highly accommodative monetary policy settings have played an important role in insulating the global and domestic financial systems, while also boosting consumer spending and investment. There is a risk that changes to monetary and macroprudential policy settings or other events could lead to a deterioration in financial conditions and a rise in interest rates. This would place additional debt servicing pressures on households and may discourage business investment in the real economy.