How are Australia’s states and territories tracking?

(AMP Capital)
13 June 2018

  • An end to the fall in mining investment is helping to stabilise growth in Australia’s mining states and territories (WA, Qld and NT to a lesser extent) while a slowing housing sector is starting to act as a drag on NSW and Vic. Tas is benefitting from a lift in population growth and housing “refugee” demand from Sydney and Melbourne. Growth in SA and the ACT has been stable.
  • After years of growth divergences across the states and territories, expect a convergence in growth across the regions over the near-term which means more comparable activity across the nation.


Introduction

The various comparative advantages of Australian states and territories (e.g. tourism in Qld, manufacturing in Vic and SA, mining in WA, QLD and NT and agriculture in SA and TAS) means there are often periods of growth divergences across the country as industries are impacted by different trends at various points in the economic cycle.

A multi-speed economy has been a feature of Australia’s economic environment for numerous years. The mining investment boom over 2010-12 transferred labour and investment to Western Australia (WA), Queensland (Qld) and (to a lesser extent) the Northern Territory (NT) from the rest of the country and these regions outperformed the rest of the nation. This changed after the downturn started in mining investment (from 2013) when mining state growth slumped while growth in the large non-mining states of New South Wales (NSW) and Victoria (Vic) lifted as services demand rose and interest rate cuts spurred a housing boom. More recently, slowing home price growth in Sydney and Melbourne, a bottoming in WA growth and an upturn in Tasmania (Tas) is leading to a growth convergence across Australia (see chart below) and should result in more comparable outcomes across the states and territories.

Source: ABS, AMP Capital

Our tracker of state and territory performance (see table below) based on the latest indicators reveals that Vic and ACT are ranked as the best performing state/territory across the various metrics, followed by NSW, with SA and Tas running around the middle of the pack. Qld, the NT and WA are still lagging behind because of the remnants of the mining investment decline.


In this note, we look at key indicators of state and territory performance, as well as the outlook for the medium-term.


The state of the labour market


Source: ABS, AMP Capital

NSW employment growth has been strongest across Australia over the past year, with large gains in healthcare, retail and construction being partly offset by losses in public administration and professional service jobs. But the steadily increasing participation rate has been pressuring the unemployment rate a little higher (although the unemployment rate is still the lowest across all of the states). The labour market is expected to remain solid in NSW, especially in infrastructure-related construction jobs. Qld’s unemployment rate still remains elevated but