Three-speed economy gathers pace, with Queensland, Northern Territory tipped to soar: CommSec

Australia’s three-speed economy has gathered pace, with resource-rich Western Australia strengthening its lead on the rest of the country, and economic growth expected to pick up the pace in Queensland and the Northern Territory on the back of rapid expansion in the resources sector.

South Australia and the Northern Territory have slipped down the list of CommSec’s State of the States report, which measures the economic performance of Australia’s eight states and territories using eight key indicators.

Author, CommSec chief economist Craig James, says the report – which compares the latest indicators with decade averages – is likely to be headed by WA for some time, but Queensland could continue to lift and the recently announced $34 billion Inpex project in NT would boost the Top End over time.

Western Australia leads the country on economic growth, construction work, unemployment and equipment investment, and also has strong readings on retail spending and population growth, according to the quarterly report. 

The second-tier areas of Victoria and the Australian Capital Territory had similar qualities, both benefitting from above-average dwelling starts and overall housing finance.

Victoria performed well on retail spending, but ACT lagged. And although ACT’s population growth outperformed the long-term average, its unemployment rate is also above the long-term average.

“Victoria and the ACT might slip if their housing sector weakens; and if that happens, Queensland will move up the ranking,” James says.

The bottom grouping comprises Tasmania, Queensland, South Australia and New South Wales, with little to separate them.

“The outlook for the NSW economy is more uncertain,” James says.

“Unemployment is steady and population growth is still slightly above long-term averages.

“But growth in equipment investment has slowed, retail spending is falling in real terms compared with a year ago, while dwelling starts are also down on a year ago. But housing finance is growing and rental markets remain tight.”

He adds that mooted job cuts across the financial sector will also hit Victoria. But East & Partners principal analyst Paul Dowling says New South Wales will bear the brunt of the slowdown in financial services, tipping it will be home to 7000 of the expected 12,000 job cuts this year.

The broker says the resource-rich states of WA, Queensland, South Australia and the Northern Territory have the most to gain from a stabilisation in Europe.

Further rate cuts will likely most help the housing sectors of Queensland and NSW, giving fuel to recent changes to stamp duty in NSW that favour new construction.