Business lifts NSW as consumers remain cautious
New South Wales ranked fourth, down one place over the quarter but two places higher than a year ago.
Business investment surged 19.4 per cent over the year, the strongest result nationally, with machinery and equipment investment rising 35.1 per cent and non-dwelling construction up 14.3 per cent.
At the same time, household consumption increased just 1.6 per cent, the weakest result in the country. Sydney’s high housing costs are weighing on household budgets, with a dual-income household buying a median-priced home spending around 31 per cent of its pre-tax income on the mortgage, the highest share of any capital city.
Victoria came in at sixth position. Government and business investment were relative strengths, but household consumption growth of 1.6 per cent was the second weakest nationally and the Victorian unemployment rate rose to 4.9 per cent, the second highest in the country.
“NSW shows just how different the picture can be within a state economy. Business investment is growing at the fastest pace in the country supported by data centre investment, while household consumption is the weakest,” Ottley said.
“In Victoria, investment and public demand are providing support, but the household side remains soft and the unemployment rate has moved higher.”
The Australian Capital Territory ranked fifth, unchanged over the quarter. The ACT has the lowest unemployment rate in the country, with household consumption and wage growth both ranked third nationally.
“The ACT has one of the more mixed economic pictures in the country. It has low unemployment and solid household spending, but construction is moving in the opposite direction, with dwelling investment falling sharply after a period of strength,” Ottley said.
At the other end of the rankings, the Northern Territory remained seventh, combining the country’s strongest household consumption growth and second-strongest dwelling investment with the weakest business investment and wage growth.
Tasmania ranked eighth after recording the largest annual fall in the standings, with public demand declining 5.7 per cent over the year, however this is largely due a base effect following a recent surge after the Government purchased Spirit of Tasmania ferries. The Tasmanian unemployment rate has risen to 5.1 per cent, the highest in the country, although household consumption remains comparatively resilient.
Data centre investment gives NSW and Vic a push
The data centre boom is emerging as a major new force in Australia’s investment landscape, led by NSW and Victoria but increasingly spreading to other states.
“Data centres are becoming an increasingly important part of the investment story, particularly in NSW and Victoria,” Mr Ottley said.
“The June quarter showed that activity is shifting from equipment and fit-out towards construction, while interest is also spreading beyond the two largest states.”
Outside NSW and Victoria, private non-dwelling construction rose over the year in Western Australia, Queensland, South Australia and Tasmania, while machinery and equipment investment was particularly strong in WA and Queensland.
About the CommBank State of the States report
The headline index compares economic performance across Australia’s eight states and territories using six equally weighted indicators. Each quarter, every jurisdiction’s result is measured against the eight-state median and scaled against historical state-to-state variation, allowing different indicators to be compared on a common basis.
Higher scores indicate stronger performance, except for unemployment, where a lower rate is better. The six indicator scores are averaged to produce a composite score and ranking from 1, strongest, to 8, weakest. A score of zero indicates performance in line with the national state-and-territory median, while positive and negative scores indicate relative outperformance or underperformance.
The index uses official ABS data, based on real, seasonally adjusted measures. Individual indicator scores are capped at their historical 10th and 90th percentiles to prevent unusually volatile results from disproportionately affecting the rankings.
