New South Wales remains top in the economic performance rankings but Victoria has closed the gap, according to the latest State of the States report released today by CommSec.
Using eight economic indicators, the online broker arm of Australia’s largest bank assesses the performance of each state and territory each quarter.
New South Wales retained top rankings on five of the eight economic indicators (retail trade, dwelling starts, equipment investment, construction work and unemployment) and Victoria strengthened the second position amid high population growth and an unemployment rate almost 3 per cent below the decade average. The ACT followed in third place, experiencing the highest annual home loan growth nationally.
CommSec Chief Economist Craig James says: “The latest data shows Australia’s economies to be in good shape but there are broad differences in relative performance, especially with respect to population growth and housing activity.”
Each state and territory economy was assessed on eight key indicators comprising economic growth, retail spending, business investment, unemployment, construction work, population growth, housing finance and dwelling commencements.
Just as the Reserve Bank uses long-term averages to determine the level of "normal" interest rates, CommSec compares the key indicators to decade averages - that is, against the "normal" performance.
CommSec also compares annual growth rates for the eight key indicators for all states and territories as well as Australia as a whole, enabling a comparison of economic momentum. Victoria and the Tasmania top growth on two measures each. South Australia, Northern Territory, Queensland and the ACT lead the way on the other four. Victoria exceeded the national-average on six of the eight indicators.
Findings on each state include:
1. New South Wales
New South Wales has retained the position as the best performing economy, at or near the top of most indicators. It secured top rankings on the same five economic indicators as last quarter: retail trade, dwelling starts, equipment investment, construction work and unemployment. The state was ranked third on economic growth, down from second position last quarter, population growth and housing finance.
"New South Wales maintained the top spot on the retail rankings and also led the nation with construction work at record highs. The state also saw trend unemployment 8.3 per cent below the decade average," Craig says.
Victoria is ranked second on economic performance in five of the eight indicators: economic growth, retail spending, housing finance and dwelling stats. The state ranks third on the other three indicators.
"High population growth and improvement in the job market have strengthened Victoria’s position. The latest December quarter wage growth figures also shows that Victoria leads the nation, with wages up 2.4 per cent," Craig says.
3. Australian Capital Territory
The ACT held on to third spot on the performance rankings. The state is top-ranked on housing finance, in second spot on employment and in third position on dwelling starts.
"The ACT has seen the strongest annual growth of home loans, up 8.4 per cent, with the number of commitments up by 28 per cent on the long-term average," Craig says.
Tasmania remains in fourth position and continues to benefit from faster relative population growth. Annual population growth of 0.72 per cent is 32.5 per cent above the decade-average rate.
"There were a couple of stand outs in Tasmania: equipment investment was at 5-year highs in trend terms, and home building starts are up 29.1 per cent on a year ago – the fastest growth in two and a half years," says Craig.
5. South Australia
South Australia is in fifth spot on the performance rankings. In terms of annual growth of real retail trade, South Australia is ranked second, up 4.0 per cent. But on the other side of equation, South Australia’s population growth rate was below decade averages, down 33 per cent.
"In terms of annual growth rates, South Australian construction work done in the December quarter was at record highs and up 19.1 per cent on a year ago," Craig says.
Queensland remains in sixth position. But the outlook is promising with population growth at 4-year highs.
"Queensland has the strongest annual employment rate nationally, up 4.3 per cent, above ACT (up 3.9 per cent) and NSW (up 3.6 per cent)," Craig says.
7. Northern Territory
The Northern Territory remains in seventh position on the economic performance rankings. It is top ranked on economic growth and second-ranked on construction work done but lags all other states and territories on five of the indicators. The good news is that exports are growing strongly, up 22 per cent on a year ago.
"Economic activity in the Top End is 28.9 per cent above its "normal", or decade-average, level of output. It also has the fastest nominal annual economic growth rate in the nation, up by 7.6 per cent on a year ago, although this has slowed significantly over the past year," Craig says.
8. Western Australia
The economic performance of Western Australia continues to face challenges with the transition of resource projects moving from the production to the export phase. Western Australia is seventh on five indicators and lags other economies on the other three indicators.
"The good news is that home building in Western Australia continues to lift from four-and-a-half-year lows. In addition, stronger export activity in the Western Australian economy is boosting incomes,” Craig says.
Read the latest State of the States report.