Overall results
- How are Australia’s states and territories performing? Each quarter CommSec attempts to find out by analysing eight key indicators: economic growth; retail spending; equipment investment; unemployment; construction work done; population growth; housing finance and dwelling commencements.
- Just as the Reserve Bank uses long-term averages to determine the level of ‘normal’ interest rates; we have done the same with key economic indicators. For each state and territory, latest readings for the key indicators were compared with decade averages – that is, against the ‘normal’ performance.
- This report is particularly timely. Released just ahead of the Federal Budget and a possible July election it provides insights on the shape of state and territory economies.
- NSW has retained top spot as the best performing economy. However the Victorian has edged a little closer to top spot. Both states are maintaining a healthy lead over the other states and territories.
- The ACT economy has held onto third spot.
- And while the Northern Territory economy has held onto fourth place there is now little now separating Queensland (fifth) from the ‘top end’ economy.
- The big change over the past quarter has been another drop in the Western Australian economy, this time to sixth position (previously fifth).
- And the Tasmanian economy has moved up the rankings into equal seventh with South Australia. There is little to separate the bottom three ranked economies.
- NSW has retained its top rankings on population growth, retail trade, dwelling starts, and unemployment but has drifted to second spot on housing finance. NSW improved to second ranked on economic growth and is still fourth-ranked on construction work done.
- Victoria has gained substantial ground on NSW and is solidly in second spot on the economic performance rankings. Victoria’s main strength is housing finance and is ranked second on a number of indicators (population growth, retail trade, unemployment, and dwelling starts).
- The ACT remains the third ranked economy. The ACT is second ranked on equipment investment and third ranked on population growth, housing finance, and retail trade. Equipment investment is up 21.1 per cent on a year ago.
- The Northern Territory is fourth ranked and remains in top spot for economic growth and construction work done. However the territory economy is losing momentum now ranked last ranked on population growth, business investment and housing finance.
- Queensland is in fifth spot on the economic performance rankings. While third ranked on dwelling starts, it is bottom ranked on construction work and seventh ranked on economic growth.
- Western Australia shifts from fifth to sixth ranked. The mining state is second ranked on construction work and fourth ranked on retail trade. But struggles on unemployment (last) and is ranked seventh on business investment, population growth, and housing finance.
- Tasmania is now equal seventh at the bottom of the Australian economic performance table – with South Australia. Tasmania is seeing a modest lift in momentum, now seventh ranked on retail (previously eight). The apple isle is also fourth ranked on unemployment.
- South Australia does best on population growth and equipment investment (both fourth ranked) but is seventh or eighth on three indicators
Looking Ahead
- Currently we look at eight indicators to get the broadest assessment of economic performance. If we added new motor vehicle registrations to the list the only change in the overall economic rankings would be Western Australia shifting lower, giving up sixth spot to South Australia.
- NSW has a solid grip on the top ranking of economic performance. Unemployment has improved while population growth is above long-term averages, thus providing solid momentum to the economy.
- Victoria also still has a strong grip on the second ranking and has been able to narrow the gap with NSW. Victoria has solid population growth which is why housing finance is the strongest in the nation.
- The ACT has comfortably held onto third spot but remains well behind Victoria and NSW. Stronger housing activity and the strength in business investment will support the job market and retail spending over 2016.
- The Northern Territory will face challenges in the next few years as key resource projects are either completed or near completion. Slow population growth, weak demand for housing loans and a sharp fall in dwelling starts will constrain economic momentum.
- Queensland remains mid-ranked across economies just above Western Australia, South Australia and Tasmania. Encouragingly, the lower Australian dollar will support agricultural exports and more importantly the tourism sector in coming months.
- Western Australia continues to slip in the performance rankings, having relinquished top spot in October 2014. Slower population growth and higher unemployment will constrain activity in the housing market
- The South Australian job market has improved in the past eight months. If the positive trend continues, then there is scope for an improvement in retail spending.
- The Tasmanian economy is seeing a lift in momentum. The lower currency on a year ago is providing a boost to an array of sectors, especially tourism.
Methodology
- Each of the states and territory economies were assessed on eight key indicators: economic growth; retail spending; equipment investment; unemployment, construction work done; population growth; housing finance and dwelling commencements.
- The aim is to find how each economy is performing compared with “normal”. And just like the Reserve Bank does with interest rates, we used decade-averages to judge the “normal” state of affairs. For each economy, the latest level of the indicator – such as retail spending or economic growth – was compared with the decade average.
- While we also looked at the current pace of growth to look at economic momentum, it may yield perverse results to judge performance. For instance retail spending may be up sharply on a year ago but from depressed levels. Overall spending may still be well below “normal”. And clearly some states such as Queensland and Western Australia traditionally have had faster economic growth rates due to historically faster population growth. So the best way to assess economic performance is to look at each indicator in relation to what would be considered ‘normal’ for that state or territory.
- For instance, the trend jobless rate in the ACT of 4.3 per cent is the lowest of all economies. But this jobless rate is actually up 18.5 per cent on its ‘normal’ or decade-average rate of 3.6 per cent, ranking it sixth on this indicator – that is, one of the worst, not best performing states & territories on the indicator.
- Trend measures of the economic indicators were used to assess performance rather than more volatile seasonally adjusted or original estimates.
Read the full report here.