CommSec State of the States, October 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 16^th 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 higher-than-desired price inflation.
• 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.
• Western Australia now leads the national performance rankings for the first time in a decade. The state is ranked first on three of the eight indicators. In a closely fought contest, South Australia slips to second spot.
• The big mover is Queensland, which jumps up to third from fifth place. Victoria slips off the podium to fourth from third place, with Tasmania inching up to fifth from sixth spot.
• The ACT has tumbled to sixth place from fourth, followed by NSW, which is still in seventh place.
• The Northern Territory remains in eighth spot. We acknowledge that the economic performance ranking criteria disadvantages this small, open economy. 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 now alone in first spot. Queensland is second, the Northern Territory is third and the ACT is fourth. Tasmania stays fifth ahead of South Australia in sixth spot, followed by Victoria and NSW in seventh and eighth spots, respectively.

Analysis

Where to from here?

• Last quarter we noted that Western Australia was in prime position to take over from South Australia in first place. We also said Victoria, Queensland and the ACT were all in striking distance of top spot too with solid annual growth rates.
• While Western Australia and Queensland moved up the leaderboard, as expected, Victoria and the ACT lost some momentum and are now ranked mid-table in a tight cluster with Tasmania.
• Looking ahead, Western Australia could consolidate its position atop the leaderboard given its strong recent economic performance.
• South Australia’s economy has lost some momentum recently, but alongside the fast-improving Queensland economy, remains in striking distance of top spot.

Methodology

• Each of the state 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’. Similar to what 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 3.9 per cent in September 2024. But the NSW unemployment rate was 17.9 per cent below its decade average, while the South Australian jobless rate of 4.2 per cent was 27.6 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.
• We now measure economic growth using real state demand plus real net trade in goods and services in seasonally adjusted terms. While the data only extends back four years, the results can be consistently compared for all economies in real terms.

Read the report.