NSW races towards the top of the economic leader board

Shifts in state economic performance, and rankings, have been predicted in a major quarterly economic analysis of the performance of Australia’s states.

According to CommSec’s latest “State of the States” report, both industry and state economy “winners and losers” will change as the mining boom fades, making way for the growing momentum in home construction.

While WA remains Australia’s best performing economy, there was little to separate it from the second best performing economy, the NT.

However, it is NSW’s big improvement – from fifth to third place in the rankings – which is, perhaps, of most interest.

CommSec chief economist Craig James said that, in contrast to the NT which was being held back by weak growth in the housing sector, momentum in NSW’s economy was building.

“It is underpinned by stronger activity in home construction although the upturn for the economy is still in its relative infancy.”

Queensland and Victoria were sitting in the middle of the rankings, although rising unemployment could start to impact on Victoria’s performance.

Meanwhile, the ACT economy slipped from equal third best down to sixth, largely due to weak performance in the areas of business investment, construction work and population growth.

SA and Tasmania remained at the bottom of the list, with their outlook described as challenging – although the affordability of their housing sectors might start to attract investor attention away from NSW and Victoria.

James told media the analysis showed some encouraging signs for the housing market, particularly in the areas of housing finance and dwelling starts.

Overall, the Australian economy was in pretty good shape and the narrowing of the gap between WA and the other states indicated the country no longer had a two-speed economy, he said.

“There was even a degree of improvement in Tasmania, and that is expected to improve as we see housing markets lift economies across the board.”

State of the States – April 2014

*The report used eight key indicators in its assessment: economic growth, retail spending, equipment investment, unemployment, construction work done, population growth, housing finance and dwelling commencements.