Tasmania has seen a significant improvement in its economic performance as population growth helps drive demand for housing and support the state's job market, according to the January 2017 State of the States report by CommSec.
The Apple Isle jumped to fourth position from seventh in the report's economic performance ranking, overtaking Queensland, Northern Territory, South Australia and Western Australia.
“Population growth is clearly an important driver of the broader economy, especially retail spending and housing demand,” CommSec economists Craig James and Savanth Sebastian said in the research report today.
Tasmania’s annual population growth rose to 0.48% from 0.43%, while its annual growth in home lending was the strongest in the country, at 10.3%, as unemployment eased over the past three months, they said. The report also noted Hobart's property market was the third-strongest performer of the capital cities last year after Sydney and Melbourne, with house prices up 11.2% over 2016 according to CoreLogic.
The quarterly State of the States report measures the economic performance of the states and territories in Australia using eight key indicators, namely economic growth, retail spending, business investment, unemployment, construction work done, population growth, housing finance and dwelling commencements.
NSW remains at overall top spot with broad-based strength, while Victoria held its second ranking, driven by strong population growth and housing finance activity.
Higher home prices and a firm job market supported the economy in the ACT, which is ranked number 3.
“The latest data indicates a two-tiered national economy with strength in the south-east states and territories, while there is little to separate the other state and territory economies,” the report said.
“NSW remains solidly on top of the economic performance rankings but it may experience a challenge from either Victoria or the ACT over the coming year,” it added.
WA at the bottom
Queensland moved up one spot to fifth position, underpinned by robust home construction amid a modest recovery in population growth.
“In fact, home starts are more than 36% higher than the decade-average,” the report noted.
In the NT, a strong job market was unable to counter the impact of weak population growth, which affected consumer spending and housing demand. The state two spots fell to sixth position.
Sitting in seventh spot is SA, which is struggling with trend unemployment but which has potential to improve going forward as real wage gains support consumer spending, CommSec predicted.
WA's struggling economic fortunes continue to reflect the end of the mining construction boom, but the state’s outlook could improve on the back of the recent strong recovery in metal prices and record mining export volumes.
“Rural incomes also have scope to rise,” CommSec added.