As has been the case for several years, Western Australia remains the state with the best overall economic conditions, according to the Commsec State of the States report released this morning.
However, though a long way behind WA, the Australian Capital Territory has shot ahead to second place, which Commsec economist Craig James admits “raises more questions than answers”.
An urgent meeting is being held by the ACT and Region Chamber of Commerce and Industry to address the high number of ACT business going into insolvency.
But the ACT has some things going for it, James said.
“The basic factor is, people continue to go to the territories,” he told SmartCompany. “So population growth is strong and people are continuing to find jobs.
“You’ve also got a degree of innovation by the ACT administration – they’ve reduced taxation and are encouraging more business to the territory, and perhaps that’s helping.
“With more people moving there, there’s greater demand for goods and services, spending and infrastructure, and that feeds into overall conditions.”
The quarterly report compares the economic performance of Australia’s states and territories across economic indicators, including economic growth, retail spending, equipment investment, unemployment, population growth and housing finance.
It also compares the performance of individual states and territories against their past performance, by comparing how the state and territory economies are doing today compared to their respective average conditions over the past 10 years.
Recent reports have seen Western Australia’s conditions remain strong or improve as the rest of the economies stagnated, raising fears of a ‘two-speed’ economy.
But the end of the mining boom seems to be weighing on Western Australia, which saw a rise in unemployment. Economic performance didn’t become any more polarised in the three months to June, the report notes.
So which state is the best state in which to own a small business?
James says it very much depends on the type of industry you’re in.
“If you’re focused on the housing sector, the growth in that is coming from places like Western Australia, Victoria and the ACT,” he says.
“In New South Wales, unemployment is only a little bit higher than the long-term average, there’s strength in the housing sector, and it’s a large economy that’s now growing at a good rate. So you could say small businesses in New South Wales are better off than those in other states.”