NSW has maintained its lead as the nation’s best performing economy, with second placed Victoria edging closer to its northern neighbour, according to the latest CommSec State of the States report.
The quarterly report shows NSW and Victoria are maintaining a healthy lead over the other states and territories through strong results in population growth, unemployment, retail spending and housing finance.
The biggest change over the past quarter has been another drop in the Western Australian economy, this time to sixth position (previously fifth), demonstrating continuing uncertainty in some areas as the nation transitions from the mining boom to a services-led economy.
The ACT economy has held onto third spot and while the Northern Territory economy is in fourth place, there is little separating it from Queensland which ranks fifth. The Tasmanian economy has moved up the rankings into equal seventh with South Australia.
The CommSec State of the States report is a quarterly ranking of the Australian states and territories based on eight key economic performance indicators: economic growth; retail spending; equipment investment; unemployment; construction work done; population growth; housing finance and dwelling commencements.
Craig James, Chief Economist, CommSec, said this report is particularly timely, being released just ahead of the Federal Budget and expected federal election in July.
“NSW continues to lead other states and territories in economic performance, but Victoria has gained substantial ground with strong housing finance and the fastest annual economic growth rate in the country.
“While there are some issues associated with the economy transitioning from mining to business services, the outlook for all the states and territories in 2016 remains relatively positive, underpinned by record low interest rates, good employment figures, consumer spending and home building.
“The end of the construction phase of the mining boom is clearly evident in Western Australia and Queensland while the impact of an easing in property construction, as supply is meeting demand in the lead states of NSW and Victoria, is still to play out,” Mr James said.
Detailed findings for each state include:
NSW (first overall) has retained its top rankings on population growth, retail trade, dwelling starts, and unemployment but has drifted to second spot on housing finance. The state has improved to second for economic growth and is still fourth for construction work done.
“NSW has a solid grip on the top ranking of economic performance. Unemployment has improved while population growth is above long-term averages, providing solid momentum to the state’s economy,” Mr James said.
Victoria (second overall) has gained substantial ground on NSW and is solidly in second spot on the economic performance rankings. Victoria’s main strength is housing finance, and is ranked second on a number of indicators: population growth, retail trade, unemployment, and dwelling starts. The state has the fastest annual economic growth rate in the nation, up by 4.3 per cent on a year ago.
“Victoria also still has a strong grip on the second ranking overall and has been able to narrow the gap with NSW in the past quarter. Victoria has solid population growth which is why housing finance is the strongest in the nation,” Mr James said.
The ACT remains the third ranked economy overall. The ACT is second ranked on equipment investment and third ranked on population growth, housing finance, and retail trade. Equipment investment has jumped up 21.1 per cent on a year ago.
“The ACT has comfortably held onto third spot but remains well behind Victoria and NSW. Stronger housing activity and the strength in equipment investment will support the job market and retail spending over 2016,” Mr James said.
The Northern Territory is ranked fourth nationally and remains in top spot for economic growth and construction work done. Activity in the ‘top end’ is 13.2 per cent above its ‘normal’ or decade-average level of output. However, the territory economy is losing momentum, now ranked last on population growth, equipment investment and housing finance.
“The Northern Territory will face challenges in the next few years as key resource projects are either completed or near completion. Slow population growth, weak demand for housing loans and a sharp fall in dwelling starts will constrain economic momentum,” Mr James said.
Western Australia has continued to slip back, falling from fifth to sixth. The mining state is second ranked on construction work and third ranked on retail trade, but struggles on unemployment (last) and is ranked seventh on equipment investment, population growth, and housing finance.
“Western Australia continues to slip in the performance rankings, having relinquished top spot in October 2014. Slower population growth and higher unemployment will constrain activity in the housing market,” Mr James said.
Queensland is in fifth spot on the economic performance rankings. While third ranked on dwelling starts, it is bottom ranked on construction work and seventh ranked on economic growth.
“Queensland remains mid-ranked across economies just above Western Australia, South Australia and Tasmania. Encouragingly, the lower Australian dollar will support agricultural exports and more importantly the tourism sector in coming months,” Mr James said.
South Australia (equal seventh/last) does best on population growth and equipment investment (both fourth ranked) but is seventh or eighth on three indicators.
“While South Australia sits on the bottom of the rankings, the job market has improved in the past eight months. If the positive trend continues, then there is scope for an improvement in retail spending,” Mr James said.
Tasmania has moved up to equal seventh alongside South Australia. Tasmania is seeing a modest lift in momentum, now seventh ranked on retail (previously eight). The state is also fourth ranked on unemployment.
“The Tasmanian economy is seeing a lift in momentum. The lower Australian dollar is providing a boost to an array of sectors, especially tourism,” Mr James said.