CommSec State of the States – April 2021

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 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 fifth quarter in a row, Tasmania holds the mantle of the best performing economy. And the ACT remains in second spot. However there is little to separate five of the other seven economies with the Northern Territory still in eighth spot.
• In third spot behind the ACT is Western Australia, which has lifted from joint sixth position. Victoria now eases from equal third to fourth position. South Australia is in outright fifth spot from Queensland, then follows NSW and the Northern Territory.
• As noted above, Tasmania has now been on top for five straight surveys – either shared with another economy or in its own right.
• The second ranking for the ACT maintains its highest ranking for four years (April 2017).
• The third position for Western Australia is its highest ranking in six years (April 2015). Prior to April 2015, Western Australia  held top spot or second spot for over five years.

Analysis

• In the overall rankings, the big improvers over the past quarter were Western Australia and the Northern Territory. Meanwhile Tasmania consolidated its top position. As we noted last time the gap in economic performance of the states and territories continues to narrow.
• Over the quarter Tasmania lost one place on retail trade but gained one place on both housing finance and relative economic growth.
• The ACT fell four places on housing finance but rose one place on four of the other indicators.
• So Tasmania and ACT solidly held positions at the top of the performance rankings. And little change at the top of the rankings is expected in the next few quarters.
• The main challenge will come from Western Australia. The state improved five places on dwelling starts, two positions on both relative unemployment and housing finance and one place on relative economic growth. However Western Australia fell five places on equipment investment and one place on retail trade.
• The Western Australian economy has significant momentum provided by mining and home building. In fact skill shortages are identified in many building trades.
• Queensland also has scope to lift in the rankings over 2021 on improvement in the job market, rising in-bound migration and increased domestic tourism demand.

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 rates in Tasmania and Queensland were both 5.9 per cent in March. However Tasmania’s unemployment rate is 9.3 per cent below its decade average, while the Queensland jobless rate is 4.3 per cent below its decade average. So Tasmania ranks above Queensland 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.

Read the report.