CommSec State of the States – January 2020

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, the 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.
• Victoria remains the best performing economy. Tasmania has held on to second spot from NSW but there is little separating the top three states. The ACT is solidly in fourth position.
• Then there is a gap to Queensland and South Australia. And then follows Western Australia and the Northern Territory.
• Victoria benefits from high construction work and a strong job market.
• Tasmania holds second spot with strength in relative population growth, supporting home purchase and starts.
• NSW remains consistently strong across all indicators and is ranked second on three of the eight indicators.
• The ACT is in fourth spot, supported by a strong job market and solid demand for homes.
• Queensland is in fifth spot, ahead of South Australia. There is little to separate the two states.
• Western Australia remains in seventh position, ahead of Northern Territory.

Looking ahead

• On the eight indicators used for comparison, Victoria is now solely at the top of the rankings. Tasmania is just ahead of NSW in second spot.
• Over the quarter Victoria improved one spot on dwelling starts and two spots on equipment investment. But Victoria fell one spot on both unemployment and housing finance.
• NSW fell two places on population growth. NSW also fell one spot on each of dwelling starts and relative unemployment. But NSW rose two places on housing finance.
• But in net terms there was no change between NSW and Tasmania. Tasmania fell two places on equipment investment.
• The ACT is solidly in fourth position. The ACT lost two spots on economic growth but gained two spots on relative unemployment. The ACT lifted one spot on dwelling starts.
• Queensland holds fifth position in the performance rankings. Queensland improved two spots on unemployment but lost two spots on equipment investment.
• South Australia gained two positions on relative population growth and lifted one position on equipment investment. But South Australia lost one position on each of housing finance, dwelling starts and unemployment.
• Western Australia stays in seventh spot but the state is continuing to narrow the gap with Queensland and South Australia, Western Australia lifted two spots on economic growth and lifted one spot on equipment investment but it lost one spot on relative unemployment.
• Northern Territory remains in eighth position. There were no changes in relative rankings on the eight indicators. But encouragingly the Northern Territory is experiencing a lift in equipment spending from a low base.

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 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 NSW in December stands at 4.6 per cent with the jobless rate at 4.8 per cent in Victoria. However Victoria’s unemployment rate is 14.2 per cent below its decade average, while the NSW trend jobless rate is 11 per cent below its decade average. So Victoria ranks above NSW on this indicator.
• Except for economic growth, trend measures of the economic indicators were used to assess performance on all measures rather than more volatile seasonally adjusted or original estimates. Rolling annual nominal data was used to assess economic growth.

Read the report.