How are Australia’s states and territories performing?
Each quarter CommSec attempts to find out. Now in its 13th 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.
The challenge for federal, state and territory governments over the next year is to support economies at a time when the Reserve Bank is aggressively lifting interest rates to get inflation under control.
After slipping to third in the previous survey, Tasmania is again Australia’s best performing economy.
Tasmania was consistently ranked at high levels across all indicators. Tasmania ranks second on both equipment spending and housing finance.
Across all the indicators, Tasmania is ahead of Queensland, the ACT and Western Australia. Then there a gap to South Australia and Victoria. There is another gap to NSW and the Northern Territory.
Queensland is now in second position—its highest ranking in the 13-year history of the surveys—lifting from fourth spot to second position. The previous best ranking was equal third in January 2014.
The ACT has eased from second spot to third.
Western Australia is in fourth spot, from South Australia and Victoria. Then follows NSW and the Northern Territory.
In terms of the leading positions on the economic indicators, Queensland leads the rankings on relative population growth and relative unemployment.
The ACT leads on housing finance, equipment investment and dwelling starts.
Western Australia leads on relative economic growth.
South Australia leads on construction work done.
Victoria is top ranked on retail spending.
When looking across annual growth rates of the eight economic indicators, Queensland had annual growth rates that exceeded the national average on five of the eight indicators.
Analysis
For some time we have noted that there is little to separate the best performing states and territory economies. But the rankings were more defined in the current survey. Tasmania is back on top of the overall economic rankings with consistently high rankings across the eight indicators.
In the latest report, Tasmania bounced from third to first. While previous No.1, Victoria, fell from first to sixth.
Queensland lifted from fourth to second. The ACT fell from second spot to third. Western Australia improved from fifth to fourth. South Australia lifted from sixth position to fifth from Victoria, NSW and the Northern Territory.
Any of the top four economies could top the leader-board in the next survey. But momentum still lies with Queensland as per the previous two surveys. When looking at annual growth, Queensland had annual growth rates that exceeded the national average on five of the eight indicators.
Further, Queensland and the Northern Territory recorded the fastest annual growth rates on two indicators.
But also of note is the ACT, leading the overall performance rankings on three indicators.
In terms of future economic performance, much will depend on how economies support their consumers and businesses at a time of rising inflation rates and higher interest rates.
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 the ACT stood at 3.1 per cent in September with Queensland’s jobless rate at 3.7 per cent. However, Queensland’s unemployment rate was 38.6 per cent below its decade average, while the ACT jobless rate was 22.0 per cent below its decade average. So Queensland ranks above the ACT 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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