CommSec State of the States: April 2024

Overall results

• How are Australia’s states and territories performing?
• Each quarter CommSec attempts to find out which state or territory is Australia’s economic leader. Now in its 15th 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.
• Overall, the economic performances of Australian states and territories are being supported by a solid job market and strong population growth at a time of rising interest rates.
• Australia’s state and territory economies have slowed in response to higher borrowing costs and price pressures. The future path will depend on the response of inflation to higher interest rates.
• Australia’s state and territory economies have slowed as consumers respond to higher borrowing costs and price pressures. The future path will depend on the resiliency of the job market and interest rates.
• And while it was close, South Australia has gone back-to-back to lead the performance rankings. South Australia ranked first on four of the eight indicators.
• Western Australia is now ranked second with Victoria in third position.
• NSW, Queensland, the ACT and Tasmania couldn’t be split for fourth position. And the Northern Territory is eighth.
• We acknowledge that the economic performance ranking criteria disadvantages the small, open economy of the Northern Territory. As a result we highlight the annual growth rankings—a measure of economic momentum.
• Measuring annual growth rates of the eight economic indicators, Western Australia is in first spot ahead of Queensland. Victoria is third and the ACT is fourth. NSW is fifth ahead of South Australia in sixth spot followed by the Northern Territory and Tasmania in seventh and eighth spots respectively..

Analysis

• Last quarter we noted that South Australia, NSW and Victoria “are most likely to challenge for top spot”. While we were right about South Australia, Western Australia was the surprise, up from fourth to second.
• Western Australia gained ground in five indicators, especially economic growth.
• Looking ahead, South Australia, Western Australia and Victoria could conceivably take top spot in the next quarterly survey.  But apart from the Northern Territory, none of the other states and territory can be ruled out given solid population growth and firm job markets.
  

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 stood at 3.7 per cent in March 2024. But the NSW unemployment rate was 23.5 per cent below its decade average, while the South Australian jobless rate of 3.8 per cent was 35.8 per cent below its decade average. So South Australia ranks above NSW on this indicator.
• Seasonally adjusted or trend measures of the economic indicators were used to assess performance on all measures. The preference was for the less volatile trend measures. Original data is used to assess population growth.