Victoria the new leading Australian economy

Strong retail spending and a strong job market has set Victoria up as the best performing economy in the nation , unseating Tasmania which has held the crown for the past nine consecutive quarters. The ACT has jumped from equal fifth spot to second on the back of increased equipment investment and Tasmania is now ranked third. 

In terms of overall economic growth, Western Australia is the clear leader in large part to a strong resources sector. Economic activity in Western Australia was more than 35% above the decade average. The NT came in second with economic activity up 28.1% on normal and Tasmania was third with a 27.9% rise. South Australia trailed the pack with a 19.9% rise in economic activity above the decade average.

CommSec Chief Economist Craig James said that despite the change in the leader board, very little separates the top four economies. “When looking at annual growth to get a guide on economic momentum, Queensland had annual growth rates that exceeded the national average on all eight of the indicators,” James said.

The CommSec State of the States report uses the latest available information to provide an economic snapshot of each region by comparing annual growth rates for eight key indicators including: economic growth, retail spending, equipment investment, unemployment, construction work done, population growth, housing finance and dwelling commencements.

Growth across a variety of sectors

Victoria has the strongest job market in the country with an unemployment rate at a record low of 3.2%, that’s 43.2% below the decade-average. Next best is WA, with its jobless rate near a 13 ½-year low of 3.4%, and down 38% on the decade average.

In the year to June, Queensland saw the biggest growth in employment with jobs up by 4.6%, followed by WA which was up 4.2%. Low unemployment drives demand for consumer goods and thus overall retail spending.

South Australia is strongest in relative construction work while Queensland remains the leader in relative population growth despite strict border and immigration controls through the COVID pandemic.

Housing finance continued to be an area of growth for most states and territories, with new commitments in all economies above decade-long averages. The ACT reported housing finance commitments more than 70% higher than seasonally adjusted averages for the past decade.

Home prices continued to grow before the announcement of several rate rises – up 11.2% nationally – but at a slower rate than in recent years. Inflation is also weighing on all state economies with the highest figure reported in Perth at 7.6%.

Wages haven’t kept pace with inflation, however, with national wage growth at 2.4%. Wage growth was the strongest in Tasmania and the ACT at 2.8%.

Looking to the future

There is significant momentum in Queensland’s economy with both growth rates and the population to handle new roles being brought to market. “In terms of future economic performance, much will depend on how economies are affected by growing COVID-19 case numbers and also how they respond to a period of rising interest rates,” said James.

1. Victoria
   Strength: Retail spending
   Weakness: Relative population growth
2. ACT
   Strength: Equipment investment
   Weakness: Relative unemployment
3. Tasmania
   Strength: Equipment investment
   Weakness: Housing finance
4. Queensland
   Strength: Relative population growth
   Weakness: Equipment investment
5. Western Australia
   Strength: Relative economic growth
   Weakness: Housing finance
6. South Australia
   Strength: Construction work done
   Weakness: Relative economic growth
7. New South Wales
   Strength: Relative unemployment
   Weakness: Equipment investment
8. Northern Territory
   Strength: Relative economic growth
   Weakness: Dwelling starts

About the CommSec State of the States Report

The State of the States report uses the most recent economic data available, however while some data relates to the March quarter, other data – such as unemployment – is timelier, covering the month of June.

CommSec, the digital broking arm of Australia’s largest bank, assesses the performance of each state and territory on a quarterly basis using eight key indicators. Those indicators include: economic growth, retail spending, equipment investment, unemployment, construction work done, 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 "normal" performance. CommSec also compares annual growth rates for eight key indicators for all states and territories, in addition to Australia as a whole, enabling a comparison of economic momentum.