Q4 2023 – Victorian Economic Outlook

  • The Victorian economy has continued to perform supported by strong population growth, driven by a rebound in international student arrivals.

The Victorian economy has continued to perform well, delivering growth in real gross state product (GSP) of 2.6% in the year to June 2023. This raised Victoria’s economy to be more than 8% larger than it was in 2019, before the COVID-19 pandemic. Positive economic conditions have resulted in strong labour market outcomes. The Victorian labour market added more than 120,000 jobs over 2023. The annual unemployment rate sits at 4.0% as at December 2023 and the share of Victoria’s working-age population in employment is around a record high.

High inflation and a sharp rise in interest rates are leading to cost-of-living pressures for Victorian households. GSP growth is forecast to moderate to 1.50% this year, with growth in consumer spending expected to be subdued as household budgets are constrained. However, economic growth will be supported by other parts of the economy.

There is a significant pipeline of private and public-sector construction projects in delivery, and business investment intentions remain elevated. Economic activity will also be supported by strong population growth, driven by a rebound in international student arrivals.

The Victorian economy is forecast to continue creating jobs. Leading indicators of labour demand, such as job advertisements, remain elevated and support the positive employment outlook for 2024. While the unemployment rate is expected to rise modestly in this year alongside more subdued economic growth, it is forecast to remain at an historically low level.

Annual Victorian Employment Growth

Victoria’s population growth has continued to rebound strongly following the COVID-19 pandemic and ending of the associated national border restrictions. Population growth reached a high 2.7% over the year to June 2023. This was driven by net overseas migration, led by a strong rise in international students. Net overseas migration is significantly above pre-pandemic peaks.

Population growth is expected to remain strong this year, rising by 2.2%. International students are expected to continue to drive much of this growth, with the lodgement of student visa applications reaching a record level in June 2023.

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