How are Australia’s states and territories performing? Each quarter CommSec attempts to find out by analysing eight key indicators: economic growth; retail spending; business 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 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.
The latest data confirms a multi-speed national economy. NSW is solidly on top with little to separate Victoria and the ACT. Then there is a gap to Tasmania, Queensland, South Australia and Northern Territory and then another gap to Western Australia.
NSW has solidly held the position as the best performing economy, at or near the top on all indicators.
Victoria has lifted to second spot on the economic performance rankings but there is little to separate the state from the ACT.
The ACT has dropped from second spot to third due to a softening of the job market in recent months.
Tasmania remains in fourth spot and is joined by Queensland. There is then a small gap to South Australia, in sixth position followed by Northern Territory in seventh.
Western Australia continues to lag other economies and annual growth rates remain below national averages on all indicators..
Looking Ahead
NSW remains solidly on top of the economic performance rankings. For the past two surveys we said that NSW may experience a challenge from either Victoria or the ACT over the coming year. And that remains the case.
Victoria has lifted from third spot to second on the performance rankings. But there has been little change in its performance rankings on the eight indicators.
The ACT has eased to third spot. While economic momentum is on its side, especially with population growth and construction, the Territory has experienced a softer job market in recent months.
NSW, Victoria and ACT clearly represent the top-tier of economies. But there is little to separate Tasmania, Queensland, South Australia and Northern Territory.
Tasmania remains in fourth spot but is joined by Queensland. Tasmania is benefitting from rising population growth (fastest in six years), a solid market for established dwellings and an improving job market (strongest job growth in 2½ years).
Queensland benefits from firmer tourism, exports and housing activity. Investment and population growth have the potential to drive further broader improvement.
South Australia is in sixth position on the performance rankings. The South Australian economy is showing promising signs with investment lifting over the past quarter.
The Northern Territory slips to seventh spot. The outlook for the Northern Territory is constrained by weak population growth.
Western Australia is benefitting from generally good mining and metal prices and solid export volumes. Unemployment has also eased over the past three months. Tourism and agriculture offer attraction
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 assess 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 4.4 per cent is the second lowest of all economies. But this jobless rate is 18.2 per cent higher than its ‘normal’ or decade-average rate. In contrast, NSW’s unemployment rate is actually 10 per cent below its decade average, putting it ahead of the ACT on this indicator.
Trend measures of the economic indicators were used to assess performance rather than more volatile seasonally adjusted or original estimates.
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