CommSec State of the States
• How are Australia’s states and territories performing?
• Each quarter CommSec attempts to find out. Now in its 13th 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.
• It is important to note at the outset that all states and territories are performing solidly. That is no small matter in an environment dominated by the Covid-19 virus with the frequent – but necessary – lockdowns and border closures. The aim is to protect the health of Australians while substantial stimulus and support measures protect economies.
• In a relative sense, and for the seventh quarter in a row, Tasmania holds the mantle of the best performing economy. Tasmania leads on four of the eight indicators and is second ranked on another three.
• There is little to separate the other economies. ACT is second; Western Australia and NSW are equal third; South Australia and Victoria are equal fifth; Queensland is seventh; and the Northern Territory is eighth.
• The ACT leads on equipment investment.
• NSW is number 1 on housing finance.
• Western Australia is strongest on relative economic growth.
• The Northern Territory leads on relative population growth.
• In terms of annual growth of the eight indicators, Western Australia top the annual changes on three measures; Northern Territory leads on two (and second on two indicators); while NSW and Queensland lead on one each.
• When assessing overall economic performance, the important point to make is that all state and territory economies are performing well, supported by highly stimulative fiscal and monetary policies. Despite constant challenges from Covid-19, and lockdowns, construction is solid, while job markets are fundamentally in good shape.
• In relative performance though, Tasmania has certainly consolidated its top position well ahead of other economies.
• The success in suppressing the Covid-19 virus has meant Tasmania hasn’t been forced to lock down its economy to the same extent as other economies although it has had to close borders.
• There are few signs of Tasmania giving up the position as top performing economy in the next six months.
• There is little to separate the other states and territories although there remains a gap between seventh position and the Northern Territory economy.
• So identifying the economy to challenge Tasmania for top position is not easy. Much will depend on vaccination rates, and reopening of state and foreign borders. But stimulus applied by state and territory governments will be important.
• Queensland would be a key beneficiary of the opening of borders with inter-state and overseas tourism driving spending and employment. Queensland and Northern Territory will be supported by population growth and higher commodity prices.
• 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 seasonally adjusted jobless rate in both Tasmania and Victoria stood at 4.8 per cent in September. However, Tasmania’s unemployment rate was 26.2 per cent below its decade average, while the Victorian jobless rate was 16.1 per cent below its decade average. So Tasmania ranks above Victoria on this indicator.
• Except for economic growth, seasonally adjusted or trend measures of the economic indicators were used to assess performance on all measures. While preference was for trend measures, in many cases these have been suspended in the wake of the COVID-19 crisis. Rolling annual nominal data was used to assess economic growth.
Published by Craig James, Chief Economist, CommSec