The large mining states are dominating the economy, but construction businesses in other states are set for a better year, according to the latest CommSec State of the States report.
Western Australia and the Northern Territory have taken the two top spots, although the gap is closing between the two states as the mining boom begins to slow.
Western Australia topped four criteria out of eight, including retail trade, equipment investment, construction work and population growth, while it also came in second for another two categories.
CommSec economist Savanth Sebastian says while the mining industry clearly comes out on top, construction businesses are in for a better year.
“Home builders are in for a better period in 2013 than they were in 2012, and there are certainly signs the interest rate cuts have started a building turnaround in New South Wales,” Sebastian told SmartCompany this morning.
“But for some of the other states, it’s difficult to see light at the end of the tunnel,” he said.
The quarterly report certainly places a large gap between the two mining states and other areas. While the ACT closely follows behind the Northern Territory, the CommSec report shows there is a large gap before Queensland, Victoria and New South Wales rank on the list.
South Australia and Tasmania come in last, although CommSec says construction work will give Tasmania a boost.
The report claims the Northern Territory is leading the list for economic activity, followed by Western Australia. Tasmanian activity was last, with growth in the September quarter up just 4.4% from its decade average. Trend growth in the island state was also down 3.2%, followed by Victoria at 2.7% and South Australia at 1.9%.
Western Australia also led in retail, while the Northern Territory came in second. Tasmania also had the weakest result, up just 4.2% on the decade average.
Equipment investment across the country is down, with spending down when compared with the same figures a year ago in five states – growth was only recorded in Western Australia, the Northern Territory, and the ACT.
As Sebastian says, construction work is on the rise. Rates were higher than average in all states and territories, although there was a large gap between the weakest and the strongest.
Victoria was the second weakest state, with construction work 17% above the decade average, followed by New South Wales. But in Western Australia, construction work was up 22.9% on a year ago.
Queensland construction work has been supported by flood rebuilding work during the past year, with work 52% above the decade average.
And while housing finance commitments are down from decade averages, “commitments in November were above year-ago levels in six of the economies”.
“Home building is also higher than a year ago, boosted in part by state government grants, and that will have multiplier effects on the economy in 2013,” the report states.
“The Victorian economy is certainly still being helped by relative strength in home building.”
The report also outlines reasons for optimism regarding dwelling starts, which are above decade averages in three of the states and territories.
However, Sebastian says the strength of the dollar is continuing to hurt the manufacturing sector, among other businesses. The real stand out, for now, remains the mining sector.
“I think if you looked across the nation, there is potential for further rate cuts – but it’s really going to come over the long term.”
The report said the Northern Territory has the ability to overtake Western Australia, while the third-strongest economy, the ACT, could be impacted from the softer job market.