CommSec State of the States: State and Territory Economic Performance Report, January 2025

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 strong job market and solid 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 leads the national performance rankings for the second time in a decade. The state is ranked first on five of the eight economic indicators, when compared with the decade average.
• In a closely fought contest, Queensland moves up from third spot, joining South Australia in second spot. Victoria remains in fourth place, with Tasmania steady in fifth place.
• NSW leapfrogs the ACT into sixth from seventh place, with the nation’s capital dipping down to second last.
• 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, Queensland replaces Western Australia in first spot, which slips back to second. Victoria climbs to third and South Australia is fourth. The Northern Territory is now fifth ahead of both the ACT and NSW in joint sixth. Tasmania now sits in eighth place.

Analysis

Where to from here?

• Last quarter (October 2024, edition 61) we noted that Western Australia would likely consolidate its position atop the leaderboard given its strong economic performance. We also said South Australia’s economy had lost some momentum, but alongside the fast-improving Queensland economy, would remain near the top.
• While Queensland moved up the leaderboard, as expected, the interest-rate sensitive south-eastern states and territories remained in a tight cluster mid-table. NSW displaced the ACT in sixth spot. The ACT, Northern Territory and Tasmania are all struggling with slower relative population growth rates.
• Looking ahead, Western Australia and Queensland are expected to continue their recent domination of the rankings in early 2025. Queensland was ranked first in January 2023.

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 or starts.
• 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 3.8 per cent in December 2024. But the NSW unemployment rate was 19.1 per cent below its decade average, while the South Australian jobless rate of 4.0 per cent was 30.2 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.