The Australian Capital Territory has eclipsed WA as Australia’s best performing economy, according to the latest CommSec State of the States report.
According to the report, the ACT’s low unemployment rate, rapid population growth and healthy housing and construction markets puts it ahead of resource-rich state WA.
The report states: “The ACT economy may be small, but effectively all engines of growth are firing.”
“The ACT economy continues to outperform on most measures, but Western Australia has slipped back towards the pack while the NSW economy has made up ground.”
According to CommSec chief economist Craig James, WA has fallen behind due to a lag in the housing market, while NSW has improved due to above-average population growth and increased business investment.
The report reveals business investment in NSW is 33% above its long-term average, which James attributes to population and employment growth. However, investment in housing and commercial construction is lagging.
Queensland’s construction industry is also suffering, but this is likely to change as the flood recovery effort ramps up.
Victoria continues to outperform NSW, with a strong housing market and growing employment, but business investment is weak.
South Australia is also lagging on business investment, with the high currency hitting manufacturing and the wine industry, while Tasmania is enjoying low unemployment and a healthy housing industry.
According to the report, WA appears to have the best future prospects of all the states and territories as a result of solid investment in the mining and engineering sectors.
“NSW has [the] potential to lift from the bottom of the economic leader-board if faster population growth can be translated to increased construction and overall economic growth,” the report states.
The shrinking job market has been identified as the biggest challenge for the economy in 2011, as WA’s mining boom and Queensland’s flood recovery effort increase competition for workers.
The ACT and the Northern Territory are also expected to struggle for workers due to low unemployment rates.
James says the Federal Government needs to address the looming labour shortage, particularly in light of the Queensland floods.
“It’s really up to the Federal Government to come up to the plate and increase the amount of migration to ensure that we do have the right staff on hand,” James says.