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.
- The latest State of the States report also includes a section comparing annual growth rates for the eight key indicators across the states and territories as well as Australia as a whole. This enables another point of comparison – in terms of economic momentum.
Looking Ahead
- Currently we look at eight indicators to get the broadest assessment of economic performance. If new vehicle registrations is added to the list of indicators, the only change in the overall economic rankings would be South Australia moving to fourth spot with Tasmania in joint fifth with the Northern Territory.
- NSW remains on top of the economic performance rankings but it may experience a challenge from Victoria over the coming year. Overall construction work is providing solid momentum to the economy.
- Victoria remains in second spot on the performance rankings. And given solid growth on a number of key indicators, the state is well positioned to consolidate or improve its position.
The ACT has comfortably held onto third spot in the performance rankings. Stronger housing activity and the lift in business investment will support the job market and retail spending over the coming year.
- The Northern Territory is losing momentum, and as key resource projects are completed, activity levels will slow further unless a lift in investment takes place. Slow population growth, weak demand for housing loans and a sharp fall in business investment will constrain economic momentum.
- The South Australian housing market continues to lift as investors and owner-occupiers broaden their view. Annual growth of home starts and home loans are solid.
- Queensland is second strongest on dwelling starts and population growth is the fastest in 15 months. Both tourism and agricultural exports will provide momentum in coming months and higher coal prices are encouraging.
- The Tasmanian economy has improved over the past quarter in relative terms. Population growth is close to the fastest annual pace seen in five years. Both home loans and home prices are lifting.
- The economic performance of Western Australia reflects the ending of the mining construction boom. But income levels will lift in line with record mining export volumes and the recent improvement in resource prices.
Methodology
- Each of the states and territory economies were assessed on eight key indicators: economic growth; retail spending; business 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 3.5 per cent is the second lowest of all economies. But this jobless rate is 4.2 per cent lower than its ‘normal’ or decade-average rate of 3.7 per cent, ranking it third on this 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.
