A thriving housing market and strong population growth has seen New South Wales consolidate its position as Australia’s top-performing economy.
The latest quarterly State of the States report by CommSec ranks Victoria in second place, and shows that the two south-eastern mainland states have pulled further ahead of the rest of the states and territories.
The survey analyses eight key indicators including economic growth, retail spending, equipment investment, unemployment, construction work done, population growth, housing finance and dwelling commencements.
The most recent results are then compared with decade averages for each state and territory.
This latest report shows the Northern Territory remains the third best-performing economy, but the gap has widened between the Top End and Victoria.
Western Australia now shares the third-ranked place with the Northern Territory. Queensland is in fifth place, followed by the ACT, South Australia and Tasmania.
CommSec chief economist Craig James said there had been a consolidation of the three-tiered economic system in the last quarter.
“If anything, New South Wales and Victoria basically pulled away from the other states and territories,” he said.
“We basically go into a second grouping of states then, with Northern Territory and Western Australia.
“And then we’ve got a third grouping of states — Queensland, ACT, South Australia and Tasmania — and there’s little to separate those four states at the bottom of the leader board,” Mr James said.
Population Growth Key Driver For NSW
The strength for New South Wales resides in population growth, home loan approvals and retail sales.
Mr James said it was unlikely any other state or territory could overtake New South Wales in the near future.
“Where it really stands out are in terms of housing finance and dwelling starts,” he said.
“So population growth remains above average, that’s driving growth in the housing sector, creating jobs, allowing an improvement in terms of the jobless rate and providing real momentum for the economy.”
The housing sector and population growth has also underpinned Victoria’s solid performance in the latest survey.
But those two areas have been identified as key weak points for the Northern Territory.
Mr James said while economic growth, business investment and construction work remained strong in the Top End, other areas were limiting its performance.
“Northern Territory is a very interesting economy because for the eight indicators that we look at, on three of those Northern Territory is number one, on another three of those indicators it ranks eighth or in last spot,” he said.
“Really one of the areas of softness of the Top End economy is in terms of the lack of population growth, and that’s constraining housing activity.”
Tasmania may rise out of last place, economist says
Rising unemployment and a downturn in housing activity have put pressure on Western Australia’s place on the economic ladder.
Mr James said Western Australia still had strong retail spending, economic growth and construction work, but higher unemployment was weighing on its economy.
“Clearly the mining investment boom has faded and we’re not seeing the same degree of offset coming from the housing sector,” he said.
“So, it still remains strong in terms of economic growth and construction work, but unemployment has been creeping up and that’s robbing momentum from the economy.”
There are some signs of improvement for Tasmania, particularly in its housing construction figures and home loan approvals.
Mr James said with its current momentum, Tasmania may finally surrender its long-held position at the bottom of the leader board.
“We look at dwelling starts, they’re at the highest level in 21 years and this is a lead indicator of the housing sector. The other degree of improvement is in terms of unemployment,” he said.
The ACT, meanwhile, needs to capitalise on activity in its housing market and improvements in consumer spending, in order to advance.
“In the ACT, strength is very much in terms of housing finance, but where we’re seeing some growth in the ACT is in terms of retail spending and it’s not far behind New South Wales and Victoria,” Mr James said.
South Australia though is in danger of becoming the country’s worst performing state or territory economy.
Mr James said while SA had good population growth, the real issue for the state was rising unemployment.
“The way we look at unemployment — comparing the current rate of unemployment with longer-term averages — South Australia, unfortunately, has got unemployment at trend terms at 15-year highs, and that’s really constraining growth in the overall economy.”