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 the economic indicators. For each state and territory, latest readings for the key indicators were compared with decade averages – that is, against the “normal” performance.
Now in its 12th year, 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.
For the second quarter in a row, Tasmania holds the mantle of the best performing economy in its own right. But there have been notable changes in the other rankings.
Victoria has dropped from second to third spot, behind the ACT. NSW shares equal fourth spot with South Australia. Then in joint sixth position are Queensland and Western Australia from the Northern Territory.
Looking ahead
In the overall rankings, the big improvers over the past quarter were the ACT, South Australia and Western Australia. The biggest losers were Victoria, NSW and Queensland.
Over the quarter Tasmania gained three places on housing finance and one place on dwelling starts. However Tasmania fell three spots on relative unemployment, and one spot on each of relative economic growth and construction work.
The ACT gained three spots on both equipment investment and relative economic growth and two spots on relative unemployment. The ACT lost two spots on dwelling starts and one spot on housing finance.
Victoria lost most ground on retail trade (three places) and housing finance (two places).
NSW fell three places on relative unemployment and two spots on relative economic growth.
South Australia gained most on relative unemployment (four places) and retail trade (two places) while falling two places on dwelling starts.
Queensland lost five spots on relative unemployment and three places on equipment investment but clawed back one spot on both retail trade and housing finance.
Western Australia improved two places each on relative unemployment and relative population growth and lost one place on equipment investment.
Northern Territory improved four places on relative unemployment.
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 seasonally adjusted jobless rate in Victoria was 6.7 per cent in September with the jobless rate at 7.6 per cent in Tasmania. However Tasmania’s unemployment rate is 17.9 per cent above its decade average, while the Victorian rate is 18.2 per cent above its decade average. So Tasmania ranks above Victoria on this indicator.
Except for economic growth, seasonally adjusted or trend measures of the economic indicators were used to assess performance on all measures. While preference was for trend measures, in many cases these have been suspended in the wake of the COVID-19 crisis. Rolling annual nominal data was used to assess economic growth.
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