The ACT has held its position as the best performing economy in the country but WA and Victoria are not far behind, a new report says.
According to the latest Commonwealth Securities State of the States report, the ACT is the nation’s standout economy due to above-average levels of home building, new mortgages and population growth.
While consumer spending and business investment are weak by comparison, CommSec chief economist Craig James says the ACT remains “at the top of the tree”.
The resource-rich state of WA is the second strongest state, according to the report, riding on the growth of exports, business investment and construction.
However, WA is held back by its housing sector, with weak demand for new and existing homes, and home construction.
According to the report, Victoria is the third strongest state due to low unemployment and housing demand, and the subsequent growth in retail spending, but the state’s main hindrance is private business investment.
James says while the ACT and WA economies have been outperforming for about a year, Victoria has emerged as the biggest improver and is closing in on the other states.
He has dismissed claims Australia is a two-speed economy, pointing out that the neither the ACT nor Victoria are associated with the mining sector.
“It is conceivable that any one of these three economies could take top spot over the next three months,” he says.
“The ACT has got strength in terms of housing, so has Victoria. So provided you do have a growth driver, there is no reason to say just because you haven’t got a mining sector of any great note that you have got to fall behind.”
Meanwhile, the economies of South Australia and the Northern Territory remain middle-ranked, with South Australia travelling reasonably well due to above-average population growth and solid construction work.
The Northern Territory’s retail sector is benefitting from low unemployment, but construction demand and home lending lags behind other states.
Tasmania also has relatively low unemployment and is experiencing above-average new home building, but lags in retail spending.
But it’s New South Wales that has recorded the lowest rate of economic growth, despite above-average population growth and business investment, and a pickup in home lending.
According to James, a new government in NSW could provide the state with “fresh economic momentum” over 2011 and 2012.
“[The NSW] economy is picking up and we would expect that NSW is going to be one of the improvers,” James says.
State Treasurer Mike Baird said the poor ranking is the result of the previous government announcing and then cancelling infrastructure projects.
Baird said new policies, such as employment incentives for businesses and the creation of Infrastructure NSW, will help boost the economy.
“For too long, NSW has lagged the rest of the country. It’s about time we got back to leading the nation again,” he said.
Finally, the CommSec report reveals Queensland is at the bottom of the list in terms of economic performance, suffering from above-average unemployment and a poor housing market.
“Rebuilding activity following the floods is likely to be the spark to kick-start growth in coming months. But the high Australian dollar will continue to hamper tourist inflows,” James says.