CommSec State of the States, July 2021

July 2021

Overall results

• How are Australia’s states and territories performing?
• Each quarter CommSec attempts to find out. Now in its 12th year, the 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, enabling comparisons in terms of economic momentum.
• It is important to note at the outset that all states and territories are performing solidly. That is no small matter in an environment dominated by the Covid-19 virus with the frequent – but necessary – lockdowns and border closures. The aim is to protect the health of Australians while substantial stimulus and support measures protect economies.
• In a relative sense, and for the sixth quarter in a row, Tasmania holds the mantle of the best performing economy. Tasmania leads on four of the eight indicators and is second ranked on another two.
• There is little to separate the other economies. Victoria is second; ACT, third; South Australia, fourth; NSW, fifth; Western Australia, sixth; Queensland, seventh; and the Northern Territory is eighth.
• Western Australia leads on relative economic growth. The ACT leads the nation on retail trade – with real spending almost 18 per cent above the decade average. Victoria ranks first on two of the eight indicators – housing finance and construction work done.
• In terms of other economies, it is notable that:
  • Dwelling starts in South Australia in the March quarter were at 36-year highs.
  • Northern Territory leads on annual growth rates for three indicators.
  • The jobless rate in Queensland stands at a 12-year low.

 Analysis

• When assessing overall economic performance, the important point to make is that all state and territory economies are performing well, supported by highly stimulative fiscal and monetary policies. Despite constant challenges from Covid-19, activity is solid, especially in construction, while job markets continue to improve.
• In relative performance though, Tasmania has certainly consolidated its top position well ahead of other economies.
• The success in suppressing the Covid-19 virus has meant Tasmania hasn’t been forced to lock down its economy to the same extent as other economies although it has had to close borders.
• There are few signs of Tasmania giving up the position as top performing economy in the next six months.
• There is little to separate the other states and territories although there remains a gap between seventh position and the Northern Territory economy.
• So identifying the economy to challenge Tasmania for top position is not easy. Much will continue to depend on Covid-19 case numbers and vaccination rates – the latter holding the key to restoring a sense of ‘normality’ and reducing both uncertainty and volatility.
• Queensland is well supported by internal migration, driving retail spending, as well as demand for houses and cars.

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 Tasmania was 4.5 per cent in June and 4.4 per cent in Victoria. However, Tasmania’s unemployment rate was 30.8 per cent below its decade average, while the Victorian jobless rate was 23.3 per cent below 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.

Read the full report.