CommSec State of the States
• 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, the latest readings for the key indicators were compared with decade averages – that is, against the ‘normal’ performance.
• The ‘State of the States’ 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. This enables another point of comparison – in terms of economic momentum.
• For the first time in three quarterly surveys, Victoria is the best performing economy in its own right. NSW is now in second spot. Also Tasmania is now solely in third spot with ACT slipping to fourth position.
• Then there is a gap to Queensland and South Australia. And in the fourth grouping is Western Australia and the Northern Territory.
• Victoria continues to benefit from solid population growth and a strong job market.
• NSW remains consistently strong across all indicators.
• Tasmania is now solely in third spot on the performance rankings with strength in the building and purchase of homes.
• The ACT is in fourth spot, losing ground to Tasmania on housing indicators.
• Queensland is now in fifth spot from South Australia but there is little to separate the two economies.
• Western Australia remains in seventh position, ahead of Northern Territory..
• On the eight indicators used for comparison, Victoria is now solely at the top of the rankings. NSW is now in second spot. But there is little to separate the two economies.
• Over the quarter Victoria lifted two places on dwelling starts and gained one spot on equipment investment. But NSW fell two places on business investment despite taking top spot on dwelling starts.
• Tasmania is now solely in third position. In fact the strength on relative population growth, home purchase and construction could see the Apple Isle battling with NSW and Victoria for top position in the year ahead.
• The ACT is now outright in fourth position. The ACT gained three positions on equipment investment but lost three positions on dwelling starts.
• Queensland is now in fifth position in the performance rakings and continues the improvement over the past three quarters. Stronger population growth has boosted retail spending which is now growing at a 5.5 per cent annual trend rate.
• South Australia is now in sixth position in the rankings, losing three spots on equipment investment. South Australia is fifth or sixth on six of the eight indicators.
• Western Australia stays in seventh spot with the Northern Territory in eighth position. In both Western Australia and the Northern Territory exports are rising strongly. Rolling annual exports in Western Australia are up 21.1 per cent on a year ago with exports up 40.9 per cent in the Northern Territory.
• 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 the ACT of 3.4 per cent is the lowest of all economies. And this jobless rate is 13.6 per cent lower than its ‘normal’ or decade-average rate. However Victoria’s unemployment rate, while higher at 4.7 per cent, is actually 16.5 per cent below its decade average, putting it ahead of the ACT on this indicator. The lowest Victorian jobless rate on record was 4.3 per cent in trend terms.
• Except for economic growth, trend measures of the economic indicators were used to assess performance on all measures rather than more volatile seasonally adjusted or original estimates. Rolling annual nominal data was used to assess economic growth.
Published by Craig James, Chief Economist, CommSec