How are Australia’s states and territories performing? Each quarter CommSec attempts to find out by analysing eight key indicators: economic growth; retail spending; equipment investment; unemployment; construction work done; population growth; housing finance and dwelling commencements.

Just as the Reserve Bank uses long-term averages to determine the level of “normal” interest rates; we have done the same with key economic indicators. For each state and territory, latest readings for the key indicators were compared with decade averages – that is, against the “normal” performance.

Last quarter NSW stood on top of Australia’s economic performance rankings for the first time since July 2011. And NSW has maintained its position this quarter. But it has been joined on top by the Northern Territory with Western Australia slipping to third.

The next grouping is Victoria and Queensland. ACT has now overtaken South Australia into sixth spot while Tasmania is ranked eighth.

Over the past quarter, NSW has improved its position on retail spending to consolidate its position at the top of the economic performance rankings.

NSW has retained its top rankings on population growth and is also now also number 1 on retail trade. It is second placed on business investment, dwelling starts and unemployment. NSW is fourth on housing finance and overall construction work and fifth on economic growth.

The Northern Territory has overtaken Western Australia to now share the mantle of best performing economy. The NT is top on five indicators including the job market, but it’s sixth on housing finance and seventh on population growth as well as being third on retail trade.

Western Australia is second-strongest on three indicators – economic growth, retail trade and construction work. The state has slipped to third on both housing finance and dwelling starts and has fallen to seventh on unemployment.

Victoria is still the fourth-ranked economy. Victoria is best on population growth and housing finance (second ranked). But it’s sixth ranked on economic growth and seventh on equipment investment.

Queensland remains close to Victoria in the performance rankings, retaining fifth position. Queensland does best on equipment investment and overall construction work done. But it is sixth ranked on the leading indicators of population growth and dwelling starts and also sixth on unemployment.

The ACT economy has regained its position in sixth spot on the economic performance rankings. The ACT has improved its position on housing finance, economic growth and equipment investment.

South Australia is the seventh ranked on economic performance. The state is third ranked on population growth but seventh ranked on economic growth, dwelling starts, housing finance and construction work.

Tasmania remains at the bottom of the Australian economic performance table. But it has held its third-ranked position on unemployment – in fact the jobless rate is at 28-month lows. And construction work is expanding at the fastest annual rate in eight years.

Implications & Outlook

In July 2014 Western Australia ranked first in economic performance. In the next October 2014 report, Western Australia was passed by NSW. And in the latest January 2015 report, Western Australia has slipped to third, behind NSW and Northern Territory.

There will always be a changing of the guard in terms of economic performance as relative economic growth drivers variably strengthen or fade. The end of the mining construction boom should lead to more balanced growth in Western Australia.

NSW is on top because population has been growing in recent years and now home construction is responding to the shortage of accommodation. NSW looks to be well supported by home construction and infrastructure spending over 2015.

The Northern Territory shares top spot with NSW. While the NT economy is top-ranked on five of the eight economic indicators, it lags on population growth, thus affecting home building activity. Attracting labour to the ‘top end’ remains a constraint on growth.

In Victoria, high population growth is supporting home building activity but it is lacking in momentum that could enable it to move up the economic performance ladder.

In Queensland, overall construction work and equipment spending are supporting economic activity. But the soft job market and relative under-performance on population growth are constraining growth in home building.

The ACT is top-ranked on housing finance but is bottom-ranked on unemployment. As a result the ACT economy lacks momentum.

In South Australia, annual population growth is higher than a year ago and unemployment is middle-ranked. But the state underperforms on retail spending and home building and buying.

There are brighter signs in Tasmania with the trend jobless rate at 28-month lows. Further, population growth has lifted and overall construction is growing solidly.

Read the full report here.

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State of the States October 2014

How are Australia’s states and territories performing? Each quarter CommSec attempts to find out by analysing eight key indicators: economic growth; retail spending; equipment investment; unemployment; construction work done; population growth; housing finance and dwelling commencements.

Just as the Reserve Bank uses long-term averages to determine the level of “normal” interest rates; we have done the same with key economic indicators. For each state and territory, latest readings for the key indicators were compared with decade averages – that is, against the “normal” performance.

And for the first time since the July 2011 report, there is a new leader at the top of Australia’s economic performance rankings: NSW.

However it is close at the top of the rankings with NSW ahead of Western Australia (previously the top-ranked economy) and Northern Territory.

The next grouping is Victoria and Queensland followed by South Australia, the ACT and Tasmania.

While NSW is the big improver, up from third to first, the ACT economy has moved from a grouping with Victoria and Queensland to the third tier of state and territory economies.

NSW is top of rankings on population growth and dwelling starts and second on retail trade, business investment and unemployment. NSW is also third on housing finance and fourth on overall construction work and economic growth.

Western Australia has lost ground on retail trade, equipment investment and population growth – a consequence of the fading of the mining boom. But Western Australia is still best performing on housing finance – the new economic driver.

The Northern Territory is now the third best performing economy. In fact the NT is top on five indicators with low unemployment and equipment investment driving growth. But it is also third on dwelling starts, sixth on population growth and eighth on housing finance.

There is little to separate Victoria and Queensland on the economic performance rankings.

Victoria continues to record solid population growth compared with its decade average, thus sustaining home purchase and construction. But commercial and engineering activity and engineering investment are both fifth ranked of the states and territories.

By contrast, the key strengths of the Queensland economy are non-residential building and business investment (both third ranked). But relative high unemployment is holding back momentum.

South Australia is now above the ACT in the performance rankings. South Australia is generally ranked sixth to eighth on the key indicators but is third ranked on unemployment and population growth.

The ACT economy is supported by housing finance but rising unemployment has affected growth of consumer spending and business investment.

Tasmania remains at the bottom of the Australian economic performance table. Tasmania is seventh or eighth on six of the economic indicators although it currently is has the second strongest annual growth rate of retail spending of the states and territories.

Click here to read the full report.

The post State of the States October 2014 – A new leader appeared first on AdviserVoice.

Just as the Reserve Bank uses long-term averages to determine the level of “normal” interest rates; we have done the same with key economic indicators. For each state and territory, latest readings for the key indicators were compared with decade averages – that is, against the “normal” performance.

There has been no change in the rankings of States and Territories on the economic performance table.
There are basically three groups. Western Australia remains Australia’s best performing economy from the Northern
Territory and NSW. The next grouping is Queensland, Victoria and the ACT. And the final grouping is South Australia andTasmania.

Western Australia leads the way on retail trade and housing finance. The Northern Territory leads the way on economic growth, business investment, unemployment and construction work. And NSW is strongest on population growth and
dwelling starts.

Read the full report here.

The post State of the States July 2014 appeared first on AdviserVoice.

State & territory economic performance report

• How are Australia’s states and territories performing? Each quarter CommSec attempts to find out by analysing eight key indicators: economic growth; retail spending; equipment investment; unemployment; construction work done; population growth; housing finance and dwelling commencements.
• Just as the Reserve Bank uses decade averages to determine the level of “normal” interest rates; we have done the same with the economic indicators. For each state and territory, latest readings for the key indicators were compared with decade averages – that is, against the “normal” performance.
• Western Australia remains the top-performing economy in the nation, but only just, ahead of the Northern Territory and NSW. NSW has been the big improver, up from fifth to third.
• The ACT has been pushed back from the third-best performing economy to sixth, behind Queensland and Victoria. There is then a gap to South Australia and another gap to Tasmania with both states still under-performing other economies.
• Western Australia comes out on top on only two of the eight criteria – retail spending and housing finance.  Western Australia is now second on three indicators, third on two indicators and seventh on unemployment.
• The Northern Territory has consolidated second place with the main improvements occurring in business investment. NSW jumped from fifth to third-best performing economy due especially to top rankings on population growth and dwelling starts.

The post State of the States appeared first on AdviserVoice.

• How are Australia’s states and territories performing? Each quarter CommSec attempts to find out by analysing eight key indicators: economic growth; retail spending; equipment investment; unemployment; construction work done; population growth; housing finance and dwelling commencements.
• Just as the Reserve Bank uses decade averages to determine the level of “normal” interest rates; we have done the same with the economic indicators. For each state and territory, latest readings for the key indicators were compared with decade averages – that is, against the “normal” performance.
• Western Australia remains the top-performing economy in the nation with no slippage in the ranking over the past three months. The Northern Territory has leapfrogged the ACT to become the second-best performing economy. But the big changes have been below with now little to separate the ACT and Queensland. NSW and Victoria follow and are closely grouped together. There is then a gap to South Australia and another gap to Tasmania with both states clearly under-performing other economies at present.
• Western Australia comes out on top on only one of the eight criteria – retail spending. Western Australia is now second on six of the eight indicators, and fourth on dwelling starts.
• The jump in the rankings of Northern Territory to second place is due to improvements in business investment, and unemployment. Queensland recorded solid strength in business investment and in housing finance propelling it into equal third with the ACT.

Western Australia still on top; NT moves up to second. ACT and Queensland now equal third.

• Western Australia remains Australia’s best performing economy, while the Northern Territory has jumped ahead of the ACT. NSW and Victoria, are now equal fifth.

•  Western Australia leads the way on retail trade. It is second strongest on economic growth, business investment, construction work done, housing finance population growth and unemployment; and finished fourth on dwelling starts.
• The Northern Territory is now the second strongest economy with main strengths being economic growth, construction work, retail trade, dwelling starts and a huge improvement in unemployment. The Northern Territory is now third strongest in business investment. But it also in last place on housing finance.
• The ACT slipped down to third spot alongside Queensland. The ACT’s main weakness was a loss of momentum in terms of business investment. It also finished fifth on retail trade, unemployment and construction work.
• In contrast Queensland was the best performer when it comes to business investment, third strongest on economic growth, retail trade and construction work and a noted improvement over the quarter in housing finance (moving from sixth to fifth place). Queensland placed seventh strongest for population growth.
• There is still little separating NSW, and Victoria in terms of relative economic performance. NSW is third strongest on unemployment, population growth, housing finance and dwelling starts. Victoria is strongest on housing finance and fourth strongest on retail trade, business investment and population growth. But at the other end of the scale, NSW is seventh on economic growth while Victoria is seventh on construction work.
• There is then a gap in the rankings to South Australia. While the state is middle ranking on construction work, and fifth on business investment it is sixth or seventh on every other indicator.

Tasmania remains locked at the bottom of the Australian economic performance table. Tasmania lags all other economies on all of the indicators except for being sixth strongest on housing finance. The strength in housing finance may provide the state economy with a platform for improvement in coming quarters. Housing finance is up 20 per cent on a year ago, but still down 11 per cent on ‘normal’ or decade-average levels. But stagnant population growth is reducing activity across the economy, with added weakness in commercial, engineering construction and business investment.

How was performance judged?

• 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 was to find how each economy was 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 look at 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 consistently have 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 the ACT of 4 per cent is lower than all economies. But compared with its ‘normal’ or decade-average rate of 3.4 per cent, the jobless rate is actually higher in percentage terms than four of the state and territory economies, thus restraining activity in the retail sector. Trend measures of the economic indicators were used to assess performance rather than more volatile seasonally adjusted or original estimates.

Economic growth

• Ideally gross state product (GSP) would be used to assess broad economic growth. But the data isn’t available quarterly. Rather state final demand (household and business spending) is added to exports less imports to act as a proxy for GSP. Exclusion of the trade sector would provide an incorrect assessment of growth for economies such as Western Australia and Queensland.
• The Northern Territory continues to lead the rankings on economic activity. Activity in the ‘top end’ is 41 per cent above its ‘normal’ or decade-average level of output.
• Next strongest is Western Australia, with output around 30 per cent higher than the decade average level of output. Then follows Queensland (up 18.6 per cent) from the ACT (up 16 per cent).

•  At the other end of the scale, economic activity in Tasmania January 17 2014 3 Economic Insights: State of the States January 2014 in the September quarter was just 3.9 per cent above its decade average while NSW activity was up 10.3 per cent on its “normal” or average output over the past decade.
• There would be little change in the rankings if “final demand” was used instead. But Victoria would move from fifth to sixth spot and NSW would improve from seventh to fifth spot.
• Interestingly Queensland maintains the fastest annual economic growth rate in the nation, up by 4.2 per cent on a year ago, ahead of NSW with 2.2 per cent and South Australia (2.0 per cent).
• The weakest trend annual economic growth rate was recorded in Tasmania (-0.1 per cent) followed by ACT (1.1 per cent) and Victoria (1.4 per cent).

Retail trade

• The measure used was real (inflation-adjusted) retail trade in trend terms with September quarter data the latest available.
• Western Australia retains top spot on the retail rankings with spending in the September quarter, almost 22 per cent above decade average levels. Solid population growth, a lift in home purchases and firm wage growth underpin the relative strength in consumer spending.
• Northern Territory was next strongest, supported by a lift in dwelling construction, with spending 18.3 per cent above decade-average levels.
• Queensland was next strongest, with spending 14.5 per cent above decade averages, followed by Victoria (up 10.8 per cent).
• Tasmania has the weakest result on retail spending, up just 2.6 per cent on the decade average (up from 2 per cent in the June quarter), and below South Australia with growth of 7.6 per cent.
• If monthly retail trade was assessed instead (November data available), Tasmania would move to top spot, ahead of Northern Territory and NSW in the rankings. While the monthly results are more volatile it does seem to suggest that an improvement and turnaround in activity is seemingly taking place across the broader economy, with some of the weaker states starting to see a lift in activity levels.
• In terms of the monthly retail trade series, Tasmania is 5.8 per cent higher than a year ago, just in front of
• Northern Territory with 5.5 per cent growth, NSW with 4.6 per cent growth, Victoria with 4.5 per cent growth, Queensland up 4.3 per cent, followed by ACT up 4.2 per cent and South Australia up 4.1 per cent. At the other end of the scale, Western Australian spending is up 1.6 per cent.

Equipment investment

•  Queensland leads other states and territories when it comes to equipment investment. Spending in the September quarter was almost 27 per cent above “normal” – or decade-average levels. Mining investment still remained relatively strong across the resource states. Northern Territory was the biggest mover jumping from seventh to third spot. Equipment investment in Western Australia is now 24.6 per cent above decade-average levels followed by the Northern Territory (up 20.5 per cent), Victoria (up 8.8 per cent), South Australia (up 6.6 per cent) and NSW (up 6.3 per cent).

•  By contrast, new equipment spending in Tasmania was 6.8 per cent below its longer-term average in the September quarter with the ACT up 1 per cent.

•  On a shorter-run analysis, equipment investment in the September quarter was lower than a year ago in four of the state and territory economies. Currently equipment investment is down on a year ago in Western Australia (down 29.1 per cent), followed by the ACT (down 16.7 per cent), Tasmania (down 13.5 per cent), NSW (down 6.1 per cent). By contrast new equipment investment in, Victoria is up 6.6 per cent on a year earlier, followed by Northern Territory (up 4.8 per cent), South Australia (up 3.6 per cent) and Queensland (up 2.4 per cent).

Unemployment

• Northern Territory and Western Australia have arguably the strongest job markets in the nation. Northern Territory has the second lowest trend unemployment rate in the nation at 4.2 per cent, while the jobless rate is actually 1.4 per cent below its “normal” or decade average level.
• Similarly in Western Australia, trend unemployment stands at 4.5 per cent and this is 7.8 per cent above its decade average rate of 4.2 per cent.
• In NSW, unemployment is higher at 5.8 per cent and this is 12.5 per cent above the “normal” or decade-average level of 5.2 per cent.
• At the other end of the scale, Tasmania’s 7.7 per cent jobless rate is the highest in the nation and up almost 29 per cent on the decade average. The South Australian job market is next weakest. In the past 12 months the jobless rate has lifted from 5.7 per cent to 6.7 per cent and it is now 24.2per cent above its decade average level of 5.4 per cent.

Construction work

• The measure used for analysis was the total amount of residential, commercial and engineering work actually completed in trend terms in the September quarter.
• In all states/territories except Tasmania construction work is higher than decade averages. And there remains a large gap between the strongest states (the resource states) and weakest states (Tasmania).
• In Tasmania, overall new construction work completed is 9.9 per cent below its decade average. By contrast construction work done in Northern Territory was almost 79 per cent above its decade average followed by Western Australia (up 69.9 per cent) and Queensland (up 49.3 per cent).
• Next weakest to Tasmania is Victoria where construction work is 9.3 per cent above decade averages, followed by NSW (up 10.4 per cent on the decade average).
• In terms of annual growth rates, Northern Territory construction work done in the September quarter was up 18.5 per cent on a year ago, followed by Queensland (up 6.8 per cent) and South Australia (up 2.4 per cent). In the ACT, construction work was 16.4 per cent below decade averages.

Population growth

• To assess population performance we looked at the current annual growth rate and compared it with each January 17 2014 5 Economic Insights: State of the States January 2014 economy’s decade-average growth pace. And the good news is that population growth is above ‘normal’ in five states or territories with growth lifting in five jurisdictions over the past quarter.

• Western Australia is the clear leader in population growth. Not only is the annual growth rate of 3.32 per cent the strongest in the nation, it is also almost 33 per cent above the decade average. But the actual leader in the rankings is the ACT. Annual population growth of 2.2 per cent is 43 per cent above “normal’.
• In NSW current annual population growth of 1.4 per cent is 27.4 per cent above the decade average.
• At the other end of the leader-board is Tasmania where the annual population growth of 0.16 per cent was 78 per cent below the decade average rate of 0.73 per cent but growth did lift in the June quarter from 0.11 per cent.

Housing finance

• The measure used was the trend number of housing finance commitments and this was compared with the decade-average for each respective state and territory.
• Housing finance is not just a lead indicator for real estate activity and housing construction but also is a useful indicator of activity in the financial sector. It would be useful to compare figures on commercial, personal and lease finance, but unfortunately trend data is not available for states and territories.
• In four of the states and territories – the Victoria, Western Australia, NSW and the ACT – trend housing finance commitments are above decade averages. Even more encouragingly commitments in November were above year-ago levels in all states and territories, except for the Northern Territory.
• The ACT was the biggest mover when it comes to housing finance commitments, dropping from top spot to fourth. In the strongest economy Victoria, the number of housing finance commitments was 9.8 per cent above the decade-average level and commitments in November were 12.6 per cent higher than a year ago.
• Western Australia was in second spot for housing finance, with the number of commitments 8.3 per cent above the long-term average.
• NSW has moved up to third spot on housing finance, up 5.4 per cent on the decade average followed by the ACT (up 4.7 per cent). And importantly the NSW market has momentum with home lending 20.4 per cent higher than a year ago in trend terms.
• Northern Territory is the weakest economy for housing finance with trend commitments 19.2 per cent lower than its decade average. Next weakest was the Tasmania with trend commitments down 20.4 per cent on the decade average, but encouragingly commitments were up 20.2 on a year ago.

Dwelling starts

• The measure used was the trend number of dwelling commencements (starts) with the comparison made to the decade-average level of starts. Starts are driven in part by population growth and housing finance and can affect retail trade, unemployment and overall economic growth. However any over-building or under-building in previous years can affect the current level of starts.
• The outlook for housing construction has improved, underpinned by state government grants for new construction and low interest rates. Dwelling starts are above decade averages in four of the states and territories and starts in five states and territories are above levels of a year ago.
•  The ACT is in the strongest position for new housing construction, with starts almost 57 per cent above decade averages. In addition in the September quarter the number of dwellings started was 27.4 per cent higher than a year earlier, the strongest annual gain in two years.

•  In second spot was Northern Territory, with starts almost 40 per cent above decade averages. But momentum is January 17 2014 6 Economic Insights: State of the States January 2014 lagging with starts in the quarter 11 per cent lower than a year ago, down from 67.9 per cent growth in the March quarter. In NSW, dwelling starts in the September quarter were up 28.3 per cent on the ‘normal’ or “decade average” level with starts in Western Australia up almost 22 per cent on decade averages.
• At the other end of the scale, Tasmanian dwelling starts were 31.6 per cent below decade averages, while starts in the September quarter were 5.5 per cent down on a year earlier. Next weakest was South Australia (down 13.5 per cent), Queensland (down 12.3 per cent) and Victoria (down 3.9 per cent). However encouragingly Queensland starts were 8.8 per cent higher.

Other indicators

• Real wages were positive in all economies in the September quarter except for the Northern Territory. Strongest growth occurred South Australia at 1.4 percentage points, followed by the ACT (0.9 percentage points) and Western Australia (0.6 percentage points).
• Even using “underlying” inflation than “headline” inflation, real wages are growing on average by around 0.5-1.0 percentage points.
• Home prices are now higher than a year ago in all capital cities across Australia. Strongest growth in home prices was in Sydney (up 14.5 per cent) followed by Perth (up 9.9 per cent) and Melbourne (up 8.5 per cent). Interestingly growth rates of home prices are still below decade averages in all the rest of the capital cities. The decade average growth in Sydney is 2.7 per cent, well below other capital cities of between 4.7-10.2 per cent.

Implications and outlook

• State and territory economies continued to grow in the September quarter, but below the more “normal” growth rates over the past 5 years or 10 years. Western Australia continues to lead other economies in a relative sense with little slippage over the past three months.
• The Northern Territory has leapfrogged the ACT to become the second-best performing economy.
• But the big changes have been below with now little to separate the ACT and Queensland. NSW and Victoria follow and are closely grouped together. There is then a gap to South Australia and another gap to Tasmania with both states clearly under-performing other economies at present

• All economies should lift now that consumers and businesses are showing a sustained level of optimism. The low interest rate environment is boosting housing construction, while rising wealth levels is supporting confidence and in turn spending.
• The slowdown in mining investment will continue to affect some regions, however this should be offset by a lift in residential building. NSW, Western Australia, Queensland and ACT are expected to benefit most from a lift in home building. In addition the lower Australian dollar should provide a boost to exports in coming months and help to alleviate the risks surrounding the rebalancing of the economy.
• Firm real wages and improved housing affordability are being reflected in a lift in retail spending in Tasmania. If this leads to increased employment then there will be potential for stronger economic momentum in coming months.

Savanth Sebastian, Economist, CommSec

The post State of the States – January 2014 appeared first on AdviserVoice.

State & territory economic performance report

• How are Australia’s states and territories performing? Each quarter CommSec attempts to find out by analysing eight key indicators: economic growth; retail spending; equipment investment; unemployment, construction work done; population growth; housing finance and dwelling commencements.
• Just as the Reserve Bank uses decade averages to determine the level of “normal” interest rates; we have done the same with the economic indicators. For each state and territory, latest readings for the key indicators were compared with decade averages – that is, against the “normal” performance.
• Western Australia remains the top-performing economy in the nation with no slippage in the ranking over the past three months. The ACT has maintained its position as the second-best performing economy. But the big changes have been below with now little to separate Northern Territory, Queensland, NSW and Victoria, although in that order. There is then a gap to South Australia and another gap to Tasmania with both states clearly under-performing other economies at present.
• Western Australia comes out on top now on only one of the eight criteria – retail spending.  Western Australia is still second on five of the eight indicators, third on unemployment and fourth on dwelling starts.
• The jump in the rankings of Queensland to equal fourth is due to improvements in business investment, unemployment, housing finance and dwelling starts. The Northern Territory has lost ground in dwelling starts, population growth and business investment.

The post State of the States appeared first on AdviserVoice.

• 

  Sate of the states, July 2013

  How are Australia’s states and territories performing? Each quarter CommSec attempts to find out by analysing eight key indicators: economic growth; retail spending; equipment investment; unemployment, construction work done; population growth; housing finance and dwelling commencements.

• Just as the Reserve Bank uses decade averages to determine the level of “normal” interest rates; we have done the same with the economic indicators. For each state and territory, latest readings for the key indicators were compared with decade averages – that is, against the “normal” performance.
• Western Australia remains the top-performing economy in the nation with little slippage in the ranking over the past three months. However the big change has been the lift in the ranking of the ACT to second while the Northern Territory economy has slipped to third strongest. There has been little change in the ranking of other states with South Australia and Tasmania under-performing other economies at present.
• Western Australia comes out top on three of the eight criteria – housing finance, retail spending and equipment investment. Western Australia is still second on three of the eight indicators, third on dwelling starts and fifth on unemployment.
• The switching in the rankings of the Northern Territory and the ACT is largely due to weakening in the performance of the job market in the Northern Territory and improvement in the job market in the ACT. NSW is the fourth strongest economy from Victoria and Queensland. Then there is a gap to South Australia and then another gap to Tasmania.

Western Australia still on top; then the ACT and Northern Territory

• Western Australia remains Australia’s best performing economy, while ACT is now second strongest from the Northern Territory.
• Western Australia leads the way on retail trade, equipment investment and housing finance. It is second strongest on economic growth, construction work done and population growth; and finished third on dwelling starts and fifth on unemployment.
• The ACT economy is now the second strongest economy with the main strengths being housing finance, equipment investment and population growth. The ACT is now third strongest on unemployment, up from eighth in the past report.
  • The Northern Territory finished first on three indicators: economic growth; dwelling starts and construction work done and was second strongest on retail trade. But the job market has weakened over the past three months and it now ranks seventh on this indicator rather than first.
  • There is still little separating NSW, Victoria and Queensland in terms of relative economic performance. NSW is strongest on unemployment, and third strongest on population growth. Victoria is second strongest on housing finance and unemployment. And Queensland has high rankings on economic growth, equipment investment, construction work done and retail spending. But it lags on population growth and dwelling starts.
  • There is then a gap in the rankings to South Australia. While the state is middle ranking on unemployment and construction work, it lags on economic growth, retail spending and equipment investment.
  • Tasmania remains locked at the bottom of the Australian economic performance table. Tasmania lags all other economies on all of the eight indicators. The economy is still growing – economic growth and retail spending are growing faster than ‘normal’ or decade-average levels. But stagnant population growth is reducing activity in home building and home purchase, as well as commercial and engineering construction and business investment.

How was performance judged?

• 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 was to find how each economy was 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 look at 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 consistently have 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 the ACT of 3.7 per cent is lower than all economies. But compared with its ‘normal’ or decade-average rate of 3.4 per cent, the jobless rate is actually higher in percentage terms than NSW and Victoria, thus restraining activity in the retail sector. Trend measures of the economic indicators were used to assess performance rather than more volatile seasonally adjusted or original estimates.

Retail trade

• The measure used was real (inflation-adjusted) retail trade in trend terms with March quarter data the latest available. If monthly retail trade was assessed instead (May data available), there would be no change in the rankings. This provides added confidence about the overall results on consumer spending.
• Western Australia retains top spot on the retail rankings with spending in the March quarter 25.2 per cent above decade average levels. Solid population growth, a lift in home purchases and firm wage growth underpin the relative strength in consumer spending.
• Northern Territory was next strongest, again courtesy of low unemployment, with spending just under 19 per cent above decade-average levels.
• Queensland was next strongest, with spending 15 per cent above decade averages, followed by Victoria (up 11.5 per cent).
• Tasmania has the weakest result on retail spending, up just 2.7 per cent on the decade average (but up from 1.4 per cent in the December quarter), and below South Australia with growth of 6.6 per cent.
• In terms of the monthly retail trade series, Western Australian spending is 4.3 per cent higher than a year ago, just in front of Queensland with 4.2 per cent growth, the ACT with 3.4 per cent growth and NSW, up 3.2 per cent. At the other end of the scale, Tasmanian spending is 1.9 per cent down on a year ago and South Australian spending is lower by 1.0 per cent.

Equipment investment

• Western Australia continues to be well above other states and territories when it comes to equipment investment. Spending in the March quarter was almost 75 per cent above “normal” – or decade-average levels but down from 103.2 per cent in the December quarter. Next placed were the ACT (up 36.6 per cent) and Queensland (up 33.4 per cent) followed by NSW (up 15.7 per cent), Victoria (up 5.2 per cent) and Northern Territory (up 4.5 per cent).
• By contrast, new equipment spending in South Australia was in line with its decade-average while Tasmania had business investment 1.3 per cent below its longer-term average in the March quarter.
• On a shorter-run analysis, equipment investment in the March quarter was lower than a year ago in five of the state and territory economies. Currently equipment investment is down on a year ago in Tasmania (down 33.6 per cent), Northern Territory (down 26.9 per cent), South Australia (down 15.5 per cent), NSW (down 6.2 per cent) and Victoria (down 0.1 per cent). By contrast new equipment investment in the ACT is up 50.4 per cent on a tear earlier followed by Queensland (up 10.4 per cent) and Western Australia (up 0.1 per cent).

Unemployment

• NSW and the ACT arguably have the strongest job markets in the nation. While its trend unemployment rate of 5.5 per cent is not the lowest in the nation, the NSW jobless rate is just 5.1 per cent above the “normal” or decade average level.
• In the ACT, trend unemployment has fallen from 4.5 per cent to 3.7 per cent over the past four months but this is 9.3 per cent above its decade average rate of 3.4 per cent.
• In Victoria the 5.7 per cent jobless rate is 9.2 per cent above its decade average.At the other end of the scale Tasmania’s 8.1 per cent jobless rate is the highest in the nation and up 36 per cent on the decade average. The Northern Territory job market is next weakest – a significant turnaround over the last report. In the past six months the jobless rate has lifted from 4.0 per cent to 5.3 per cent and it is now 23 per cent above its decade average level of 4.3 per cent.

Construction work

• The measure used for analysis was the total amount of residential, commercial and engineering work actually completed in trend terms in the March quarter.
• In all states/territories except Tasmania construction work is higher than decade averages. And there remains a large gap between the strongest states (the resource states) and weakest states (Tasmania).
• In Tasmania, overall new construction work completed is 3.5 per cent below its decade average. By contrast construction work done in Northern Territory was almost 80 per cent above its decade average followed by Western Australia (up 66 per cent) and Queensland (up almost 53 per cent).
• Next weakest to Tasmania is Victoria where construction work is 15.8 per cent above decade averages, followed by NSW (up 19.4 per cent on the decade average).
• In terms of annual growth rates, Northern Territory construction work done in the March quarter was up 55.7 per cent on a year ago, followed by Queensland (up 7.7 per cent) and NSW (up 6.4 per cent). Four of the states and territories had weaker construction work than a year ago.

Population growth

• To assess population performance we looked at the current annual growth rate and compared it with each economy’s decade-average growth pace. And the good news is that population growth is above ‘normal’ in six states or territories while growth has also picked up in five jurisdictions over the past quarter.
• Western Australia is the clear leader in population growth. Not only is the annual growth rate of 3.47 per cent the strongest in the nation, it is also almost 46 per cent above the decade average. But the actual leader in the rankings is the ACT. Annual population growth of 2.31 per cent is the highest in 21 years and is almost 57 per cent above “normal’.
• In NSW current annual population growth of 1.25 per cent is 18 per cent above the decade average.
• At the other end of the leader-board is Tasmania where the annual population growth of 0.08 per cent is the weakest in over 11 years and a massive 90 per cent below the decade average rate of 0.77 per cent.

Housing finance

• The measure used was the trend number of housing finance commitments and this was compared with the decade-average for each respective state and territory.
• Housing finance is not just a lead indicator for real estate activity and housing construction but also is a useful indicator of activity in the financial sector. It would be useful to compare figures on commercial, personal and lease finance, but unfortunately trend data is not available for states and territories.
• In all but three states and territories, trend housing finance commitments are below decade averages – an improvement on the previous report when all economies had activity below decade averages. And encouragingly commitments in May were above year-ago levels in all but the Northern Territory.
• In the strongest state of Western Australia, the number of housing finance commitments was 10 per cent above the decade-average level and commitments in May were 16.5 per cent higher than a year ago.
• Victoria was in second spot for housing finance, with the number of commitments 2.3 per cent above the long-term average. And importantly the market has momentum with home lending 5.7 per cent higher than a year ago in trend terms to a 42-month high.
• The ACT remains in third spot on housing finance, up 1.4 per cent on the decade average followed by NSW (down 4.4 per cent).
• Tasmania is the weakest economy for housing finance with trend commitments 27.7 per cent lower than its decade average, but encouragingly commitments were up 4.9 on a year ago. Next weakest was the Northern Territory with trend commitments down 23.8 per cent on the decade average.

Dwelling starts

• The measure used was the trend number of dwelling commencements (starts) with the comparison made with the decade-average level of starts. Starts are driven in part by population growth and housing finance and can affect retail trade, unemployment and overall economic growth. However any over-building or under-building in previous years can affect the current level of starts.
•  The outlook for housing construction has improved, underpinned by state government grants for new construction and low interest rates. Dwelling starts are above decade averages in five of the states and territories and again starts in five states and territories are above levels of a year ago.
• The Northern Territory is in the strongest position for new housing construction, with starts almost 54 per cent above decade averages. In addition in the March quarter the number of dwellings started was 27 per cent higher than a year earlier, although down from the 61.6 per cent annual growth in the December quarter.
• In second spot was NSW, with starts over 16 per cent above decade averages. And there is plenty of momentum with starts in the quarter up 33.4 per cent on a year ago – the best growth in three years. In Western Australia, dwelling starts in the March quarter were up 11.2 per cent on the ‘normal’ or “decade average” level with starts in Victoria up almost 6 per cent and ACT starts still 2.3 per cent above decade averages.
• At the other end of the scale, Tasmanian dwelling starts were 38.6 per cent below decade averages, while starts in the March quarter were 25 per cent down on a year earlier. Next weakest was Queensland (down 20.5 per cent), followed by South Australia (down 12.5 per cent). However encouragingly Queensland starts were higher than a year ago, albeit modestly, up just 2.3 per cent. And South Australian starts in the March quarter were up 14.4 per cent over the year.

Other indicators

• Real wages were positive in all economies in the March quarter except for the Northern Territory. Strongest growth occurred Tasmania at 2.2 percentage points, followed by Western Australia (1.3 percentage points) and the ACT (1.2 percentage points).
• Even using “underlying” inflation than “headline” inflation, real wages are growing on average by around 1.0 percentage points.
•  Home prices are now higher than a year ago in all but Hobart (down 1.8 per cent). Strongest growth in home prices was in Darwin (up 6.1 per cent) followed by Perth (up 6.0 per cent) and Sydney (up 5.6 per cent).

Implications and outlook

• The good news is that economic performance didn’t become more polarised in the past three months. While Western Australia is still the best performing economy, it has seen some slippage in indicators such as unemployment. The Northern Territory also lost ground but the ACT lifted in the performance rankings courtesy of strong population growth, driving housing activity and leading to a stronger job market.
• There has been little change in the performance rankings of the three largest states: NSW, Victoria and Queensland.
• Tasmania remains at the bottom of the relative economic performance rankings. The economy is growing in a number of key areas such as demand for home loans but there isn’t enough momentum to catch the other state and territory economies. Encouragingly real wage growth is strong and this could serve to lift retail spending and consumer spending, boosting prospects for the business sector.
• In South Australia, government infrastructure spending is providing valuable support for the economy. Encouragingly new home loans are up 9.5 per cent on a year earlier to the highest levels in 40 months.
• All economies should lift once the uncertainty of the Federal Election is finally out of the way later in 2013.
• While new investment in mining and engineering construction is easing, the housing sector is providing a source of new growth, especially in regions where population growth is strongest.

The post State of the States – July 2013 appeared first on AdviserVoice.

Just as the Reserve Bank uses decade averages to determine the level of “normal” interest rates; we have done the same with the economic indicators. For each state and territory, latest readings for the key indicators were compared with decade averages – that is, against the “normal” performance.

For the past two quarterly reports, we judged that Australia’s multi-speed economy could more accurately be described as ‘Western Australia first and daylight second’. And we see no reason to change that judgement but Northern Territory is coming up fast.

Western Australia comes out top on four of the eight criteria, but has slipped over the past three months after coming out on top in six criteria last report. Western Australia is still first or second on seven of the eight indicators, clearly well ahead of other state or territory economies.

The Northern Territory has passed the ACT to take second spot. The other big improver is NSW, now ranked alongside Victoria and Queensland. Then there is a sizeable break to South Australia and then another sizeable gap to Tasmania.

To read the State of the States report, click here.

The post State of the States appeared first on AdviserVoice.