ACT has the strongest economy: CommSec

The Australian Capital Territory has the strongest economy of all Australia’s states and territories, CommSec says in its latest “state of the states” ranking, which found the ACT’s above-average population growth is helping to propel a mini boom in housing.

The report, which ranks states on eight criteria – economic growth; retail spending; equipment investment; unemployment, construction work done; population growth; housing finance; and dwelling commencements – placed the ACT ahead of its larger rivals for the second straight quarter.

The resources-driven state of Western Australia was next, followed by South Australia and the Northern Territory.

New South Wales, Tasmania and Queensland were the lowest raked states, with the latter hit hard by low population growth (which has filtered through to poor housing market conditions) and the recent natural disasters.

CommSec chief economist Craig James, who judges the current performance of the state and territory economies against decade averages to determine which economies are out-performing, says the results of his analysis suggest claims of a two-speed economy in Australia – divided by resource states and non-resources states – are not correct.

“When we wrote the last report in January, we noted that there had been some levelling of the performances of state/territory economies. And indeed that trend has continued. Simply it is not correct to say that Australia has a two-speed economy.”

“The ACT economy may be small, but it has demonstrated that it is more rounded than many other state or territory economies.”

The report suggests each state has its strengths, but challenges remain.

• The secrets of the ACT’s success were population growth, which underpins the state’s housing market, and stronger-than-average economic growth. However, retail sales and business investment remain far lower than in other states.
• In Western Australia, economic growth is being propelled by the exports and investment in the resources sector. However, the housing and construction sectors remain under severe pressure.
• In Victoria, housing and strong employment are pushing the state along, but private business investment is a drag on growth.
• In South Australia, above-average population growth and strong conditions for construction are somewhat offset by weaker retail spending.
• In the Northern Territory, low unemployment is driving retail spending, but the construction sector is a drag on overall conditions.
• New South Wales continues to face a battle to turn its fortunes around, although a new government may help. While business investment is above average, residential and non-residential construction is struggling.
• In Tasmania, unemployment remains relatively low, but retail spending is subdued.
• Disaster hit Queensland is plagued by low population growth and disastrous conditions in the housing sector. However, post-flood rebuilding should spark more economic activity.

One challenge looming for all states and territories is labour shortages, with all regions seeing wages growing faster than prices.

James says the Federal Government may need to act.

“The Federal Government could reduce potential barriers to growth by doing more to boost labour supply.