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 shows Australia’s economies to be in good shape but with some differences in relative performance. NSW remains solidly on top of the economic performance rankings from Victoria while the ACT holds down third spot. Then there is a gap to Tasmania, South Australia and Queensland, and then a gap to the Northern Territory and Western Australia.
NSW has retained the position as the best performing economy, at or near the top of all indicators.
Victoria holds second spot on the economic performance rankings with strength provided by high population growth, boosting housing demand.
The ACT retains third spot on the performance rankings, supported by a stronger job market.
Tasmania has lifted from fifth to fourth spot, ahead of South Australia with a similar gap to Queensland.
Northern Territory remains in seventh position.
Western Australia continues to lag other economies and annual growth rates remain below national averages on seven of eight indicators surveyed.
Looking Ahead
NSW remains on top of the economic performance rankings, solidly ahead of Victoria. Both states have relatively high population growth, underpinning home building and retail spending.
Victoria remains clearly in second on the performance rankings with few changes over the past quarter. Victoria also leads annual growth rates on two indicators.
The ACT remains in third spot with solid improvement in the job market over the past quarter. The ACT also continues to lead other economies on home loans.
Tasmania rises from fifth to fourth, courtesy of firmer business investment and a lift in population growth – now the strongest in 6½ years.
South Australia eases from fourth to fifth, but rather than weakening, it loses fourth position to a strengthening Tasmanian economy.
Queensland remains in sixth position. But as noted by the Reserve Bank, there are encouraging trends. Queensland employment growth is the strongest in the nation. The state is also still being buoyed by strong export activity.
The Northern Territory remains in seventh spot. The outlook for the Northern Territory is constrained by weak population growth and falling employment.
The outlook for the Western Australia economy is buoyed by stronger employment growth – the 3.0 per cent annual growth rate is now just off the strongest levels seen in five years. And annual population growth has lifted for the past four quarters.
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 3.7 per cent is the lowest of all economies. And this jobless rate is 3.5 per cent lower than its ‘normal’ or decade-average rate. However NSW’s unemployment rate is actually 11.9 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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