State of the States
October 2018 State & territory economic performance report.
Executive Summary

Embargo: Available for Publication on Monday October 29 2018

VICTORIA LEADS FROM NSW
How are Australia’s states and territories performing? Each
quarter CommSec attempts to find out by analysing eight key
indicators: economic growth; retail spending; equipment
investment; unemployment; construction work done;
population
growth;
housing
finance
and
dwelling
commencements.
Just as the Reserve Bank uses long-term averages to
determine the level of ‘normal’ interest rates; we have done the
same with key economic indicators. For each state and
territory, the latest readings for the key indicators were
compared with decade averages – that is, against the ‘normal’
performance.
The ‘State of the States’ report also includes a section
comparing annual growth rates for the eight key indicators
across the states and territories as well as Australia as a whole.
This enables another point of comparison – in terms of
economic momentum.

Victoria remains in top spot on the economic performance
rankings ahead of NSW. However there is little to separate
the two economies. There are four groups of economies.
In the second group is ACT and Tasmania. The third group
is Queensland and South Australia. And then there is a gap
to the Northern Territory and Western Australia.
Victoria is in top spot due to strong construction activity and
the lowest jobless rate in a decade.
NSW is in second spot on the economic performance
rankings and has held its relative position on most
indicators.
The ACT retains third spot on the performance rankings but
Tasmania is closing the gap, improving its relative position
on four of the eight indicators.
South Australia is now in fifth spot ahead of Queensland,
with the former picking up its relative position on business
investment.
The Northern Territory remains in seventh position just
ahead of Western Australia. There are positive trends for
both economies, especially with regard to the job market.

 State of the States
Victoria remains the top of the economic performance
rankings. Victoria ranks first on economic growth,
unemployment and construction work done.
NSW is second on the overall economic performance
rankings but still holds top spot for retail spending and
dwelling starts. NSW is second ranked on three other
indicators.
The ACT has held on to third spot in the rankings. The ACT
is top-ranked on relative housing finance and secondranked on population growth and business investment.
Tasmania is in fourth position on the economic
performance rankings, but is closing the gap on the ACT.
Tasmania is ranked first on the relative position on
population growth and business investment and is in
second spot on housing finance.
South Australia is now in fifth position on the performance
rankings ahead of Queensland. But there is still little to
separate the two economies. South Australia is thirdranked on construction work done and fourth on two other
indicators.
Queensland is now in sixth position. Queensland ranks
fifth on four of the eight indicators.
The Northern Territory retains its seventh position on the
economic performance rankings and can be broadly
grouped with Western Australia. Both are facing
challenges with the transition of resource projects moving
from the production to the export phase.
The Northern Territory is third-ranked on economic
growth. But it lags all other states and territories on five of
the indicators. The good news is that employment has now
been growing for the past five months.
Western Australia is seventh or eighth on all indicators
(eighth on three indicators). But equipment spending is
now the highest in 3½ years.
Methodology
Each of the states and territory economies were assessed on eight key indicators:
economic growth; retail spending; equipment investment; unemployment,
construction work done; population growth; housing finance and dwelling
commencements.
The aim is to find how each economy is performing compared with “normal”. And just
like the Reserve Bank does with interest rates, we used decade-averages to judge
the “normal” state of affairs. For each economy, the latest level of the indicator – such
as retail spending or economic growth – was compared with the decade average.
While we also looked at the current pace of growth to assess economic momentum,
it may yield perverse results to judge performance. For instance retail spending may
be up sharply on a year ago but from depressed levels. Overall spending may still be
well below “normal”. And clearly some states such as Queensland and Western
Australia traditionally have had faster economic growth rates due to historically faster
population growth. So the best way to assess economic performance is to look at
each indicator in relation to what would be considered ‘normal’ for that state or territory.
For instance, the trend jobless rate in the ACT of 3.6 per cent is the lowest of all
economies. And this jobless rate is 8 per cent lower than its ‘normal’ or decadeaverage rate. However Victoria’s unemployment rate, while higher at 4.7 per cent, is
actually 17.4 per cent below its decade average, putting it ahead of the ACT on this
indicator. The Victorian jobless rate is actually at decade lows in trend terms.

October 2018

ECONOMIC GROWTH

Ideally Gross State Product (GSP) would be used to
assess broad economic growth. But the data isn’t available
quarterly. And we have previously used state final demand
(household and equipment spending) plus exports less
imports to act as a proxy for GSP. But the Bureau of
Statistics has ceased calculation of state trade data in real
terms. So state final demand plus trade in nominal terms is
assessed with rolling annual totals used to remove
seasonality.
Victoria has maintained top spot on relative economic
growth. Economic activity in Victoria in the June quarter
was 26.7 per cent above its ‘normal’ or decade-average
level of output, ahead of NSW, with output 25.7 per cent
above the ‘normal’ level of output.
The Northern Territory retains third position (up 25.6 per
cent) from ACT (up 19.7 per cent) and Queensland (up
19.1 per cent).
At the other end of the scale, economic activity in Western
Australia in the June quarter was just 8.0 per cent above
its decade average while Tasmanian activity was up 15.8
per cent, behind South Australia (up 17.6 per cent).
Tasmania is strongest on the pace of economic growth.
Tasmania’s economy grew by 7.1 per cent over the year to
June, ahead of Victoria (up 5.9 per cent), South Australia
(up 5.6 per cent) and Queensland (up 4.8 per cent).
The weakest nominal annual growth rates are in Northern
Territory (down by 0.5 per cent) and Western Australia (up
0.9 per cent).
If trend State Final Demand in real terms is used,
comparing the latest result with decade averages reveals
some subtle changes in the rankings. Victoria still leads
from NSW but with ACT in third spot from South Australia
and Tasmania.

Except for economic growth, trend measures of the economic indicators were used to
assess performance on all measures rather than more volatile seasonally adjusted or
original estimates. Rolling annual nominal data was used to assess economic growth.

“Victoria has maintained top spot on relative
economic growth.”

2

 State of the States
RETAIL SPENDING

The measure used was real (inflation-adjusted) retail trade
in trend terms with June quarter data the latest available.
NSW has maintained the top spot on the retail rankings,
extending its lead over Victoria.
Spending in NSW was 18 per cent above decade-average
levels in the June quarter. Solid home building, low
unemployment, increased job security and infrastructure
building are key supports for retail spending.
Spending in Victoria was 17.7 per cent above decadeaverage levels, once again supported by home building,
population growth and firm employment.
Spending in the ACT was up 14.4 per cent on the decade
average, followed by Tasmania (up 12.8 per cent). In fifth
spot was South Australia with spending 11.4 per cent
above decade averages followed by Queensland, with
spending up by 9.2 per cent.
Northern Territory recorded the weakest result on retail
spending, up 5.5 per cent on the decade average, below
Western Australia with 7.0 per cent growth.
If monthly retail trade was assessed instead to calculate
the rankings (August data available), there would be no
change in the relative rankings. NSW remains ahead of
Victoria.
In terms of annual growth of real retail trade, Victoria is
strongest (up 4.2 per cent), from South Australia (up 3.1
per cent) and NSW (up 2.2 per cent).
Looking at monthly retail trade, Victoria (up 5.6 per cent) is
ahead of Tasmania (up 5.3 per cent) and the ACT (up 4.3
per cent).

“NSW has maintained the top spot on the
retail rankings, extending its lead over
Victoria.”

October 2018

EQUIPMENT INVESTMENT

The measure of equipment investment is spending on new
plant and equipment in trend terms with June quarter data
compared with decade averages (the ‘normal’
performance).
In the June quarter four states and territories had
equipment spending above decade-average levels – the
same result as the March quarter.
Tasmania had equipment investment up 40.2 per cent on
the decade average ahead of the ACT (up 26.1 per cent).
NSW has retained third spot, up 6.2 per cent, from Victoria
(up 5.1 per cent).
By contrast, other states and territories had equipment
spending below decade averages in the June quarter.
Weakest was Northern Territory (down 32.1 per cent) with
completion of the investment stage for a number of gas
projects.
Next weakest was Western Australia (down 11 per cent)
followed by Queensland (down 7.9 per cent) and South
Australia (down 0.5 per cent).
On a shorter-run analysis, equipment investment in the
June quarter was up on a year ago in seven of the state
and territory economies – the same as the March quarter.
Equipment investment was up the most on a year ago in
Tasmania (up 58.5 per cent) from the ACT (up 51.6 per
cent) and Western Australia (up 18.6 per cent).
Notably, equipment investment in Tasmania was at 9-year
highs in trend terms with Victoria at 7-year highs and
Western Australian investment at 3½-year highs.
By contrast new equipment investment in the Northern
Territory was down 2.9 per cent on a year ago.

“In the June quarter four states and
territories had equipment spending above
decade-average levels, the same result in
the March quarter.”

3

 State of the States
UNEMPLOYMENT

What state or territory has the strongest job market in the
nation? It is not an easy answer. But we have looked at
unemployment rates across economies, comparing the
rates with decade averages.
On this measure, Victoria has the strongest job market.
Trend unemployment in Victoria stands at 4.7 per cent, a
rate 17.4 per cent below the decade average. Employment
is also 13 per cent above the decade average.
Next best is NSW, its 4.5 per cent jobless rate being almost
16 per cent below the decade average. The ACT comes
next from South Australia and Tasmania – all with jobless
rates below their relative decade averages.
Next is Queensland – the 6.1 per cent jobless rate is 4.6
per cent higher than the long-term average. The Northern
Territory jobless rate of 4.1 per cent is 5.6 per cent above
the 3.9 per cent decade average.
The Western Australian jobless rate of 6.1 per cent is over
20 per cent above the 5.1 per cent decade-average. On a
20-year average Western Australia still has the weakest
job market of all states and territories.
NSW has the strongest annual employment rate (up 3.4
per cent), above Victoria (up 2.6 per cent) and Queensland
(up 1.6 per cent).
In NSW the trend unemployment rate equals the rate
existing from January to April 2008 which is the lowest rate
in monthly data back to 1978.
In Victoria, the trend unemployment rate is the lowest in a
decade. In South Australia the trend unemployment rate
has sat at 6-year lows for the past four months.

“In NSW the trend unemployment rate
equals the rate existing from January
to April 2008 which is the lowest rate in
monthly data back to 1978.”

October 2018

CONSTRUCTION WORK

The measure used for analysis was the total real value of
residential, commercial and engineering work completed in
trend terms in the June quarter.
In five of the states and territories, construction work in the
June quarter was higher than the decade average (the
same number as the previous quarter).
Victoria has retained top spot with construction work done
almost 39 per cent above its decade average. NSW
construction was next strongest, 31.4 per cent above the
‘norm’ or decade-average followed by South Australia (up
25.3 per cent).
In NSW, Victoria and South Australia construction work
done was at record highs in the June quarter.
The ACT is now in fourth position with construction work
8.5 per cent above decade averages followed by Tasmania
(up 6.7 per cent).
At the other end of the scale, Western Australian
construction work done in the June quarter was 38.2 per
cent below the decade-average, behind Queensland, with
construction work down 13.6 per cent on decade averages
and the Northern Territory (down 5.1 per cent).
In terms of annual growth rates, South Australian
construction work done in the June quarter was up 23.4 per
cent on a year ago followed by Victoria (up 18.2 per cent)
and NSW (up 9.9 per cent).
Two economies had construction work lower than a year
ago (one economy in the March quarter) led by the
Northern Territory with construction down by 19.3 per cent
Western Australian construction was down by 0.8 per cent
on a year ago. However the rate of decline has fallen over
the past 18 months.

“Victoria has retained top spot with
construction work done almost 39 per cent
above its decade average.”

4

 State of the States
POPULATION GROWTH

We assess relative population performance – the current
annual growth rate and compare it with each economy’s
decade-average (‘normal’) growth pace. This is most
relevant to each state or territory’s economic performance.
Population growth is clearly an important driver of the
broader economy, especially retail spending and housing
demand. The key point being that only four economies
have population growth above long-term averages.
Tasmania is strongest on the relative population measure,
with its 1.02 per cent annual population growth rate almost
78 per cent above the decade-average rate.
Population growth in the ACT is 9.3 per cent above the
decade average, followed by Victoria (up 5.4 per cent) and
NSW (up 1.9 per cent).
Annual population growth rates in the other states and
territories were below decade averages: Queensland (-5.5
per cent); South Australia (-26.6 per cent); Western
Australia (-57.9 per cent); and Northern Territory (-90.9 per
cent).
The state with the fastest absolute annual population
growth is still Victoria (up 2.18 per cent). Next strongest is
the ACT (up 2.08 per cent); Queensland (up 1.70 per cent)
and NSW (up 1.44 per cent).
The state or territory with the slowest annual population
growth is the Northern Territory, up just 0.12 per cent on a
year ago.
Tasmania’s annual population growth of 1.02 per cent is
fastest rate in 8½ years.
Western Australia’s annual population growth of 0.83 per
cent is the fastest rate in 2½ years.

“Tasmania is strongest on the relative
population measure, with its 1.02 per cent
annual population growth rate almost 78 per
cent above the decade-average rate.”

October 2018

HOUSING FINANCE

The measure used is the trend number of housing finance
commitments (home loans) and this is compared with the
decade average for each respective state and territory.
Housing finance is not just a leading indicator for real
estate activity and housing construction but it is also a
useful indicator of activity in the financial sector. It would
be useful to compare figures on commercial, personal and
lease finance, but unfortunately trend data is not available
for states and territories.
There has been just one change in the rankings with
Tasmania moving past Victoria into second position. In six
of the states and territories trend housing finance
commitments are above decade averages. But in all but
one states or territory, trend housing finance is below yearago levels.
The ACT remains in top spot with the number of
commitments up by 19.2 per cent on the long-term average.
Next strongest is Tasmania (up 15.4 per cent on decade
averages) followed now by Victoria (up 15 per cent) ahead
of NSW (up 6.5 per cent).
Queensland is next strongest (up 1.4 per cent) ahead of
South Australia (up 0.3 per cent).
Northern Territory remains the weakest for housing finance
with trend commitments 29.7 per cent lower than its
decade average. Commitments in Western Australia are
down 26.1 per cent on the decade-average.
Home lending activity has softened and annual growth of
home loans is now present in only Tasmania (up 3.6 per
cent). In all states and territories except South Australia
and Tasmania, annual percentage changes have
weakened in the past three months.

“…in all but one state or territory, trend
housing finance is below year-ago levels.”

5

 State of the States
DWELLING STARTS

October 2018

OTHER INDICATORS

The measure used was the trend number of dwelling
commencements (starts) with the comparison made to the
decade-average level of starts. Starts are driven in part by
population growth and housing finance and can affect retail
trade, unemployment and overall economic growth.
However, any over-building or under-building in previous
years can affect the current level of starts.

Inflation rates (annual changes of consumer prices) were
either unchanged or higher across capital cities between
the March and June quarters. Perth recorded the lowest
annual increase in prices (up 1.1 per cent) while Darwin
prices rose by 1.2 per cent over the past year.

Home building remains strong in NSW and Victoria due to
above “normal” population growth, but then there is a fair
gap to the other states and territories. Interestingly, four of
the eight states and territories posted a lift in trend starts in
the June quarter after the majority reported softer starts in
the March quarter.

Inflation rates and annual wage growth are historically low
across capital cities.

NSW has taken back top spot for dwelling starts from
Victoria. Starts in NSW are 54.9 per cent above decadeaverages, ahead of Victoria (up 38.9 per cent on the
“normal” or decade-average level of starts).

Canberra had the highest annual inflation rate in the June
quarter at 2.8 per cent, ahead of Adelaide (2.7 per cent).

To assess real wage growth, June quarter data is used.
And the biggest positive gap between wage growth and
inflation was recorded in Queensland with wages 0.5
percentage points higher than consumer prices.
By contrast wages were 1.0 percentage points below
consumer prices in the ACT. South Australian wages were
also 0.6 percentage points below consumer prices.

Tasmania is now in third spot with starts up 18.4 per cent
on decade averages from South Australia (up 16 per cent),
Queensland (up 13.7 per cent) and the ACT (up 9.7 per
cent).

Wage growth in the year to June was strongest in both
Victoria and Tasmania (2.5 per cent) ahead of Queensland
(up by 2.2 per cent) while wages in Northern Territory and
Western Australia were up by only 1.5 per cent.

At the other end of the scale, dwelling starts in the Northern
Territory were 47.8 per cent below decade averages. And
activity continues to ease with trend starts at the lowest
levels in almost 28 years. Next weakest was Western
Australia (down 27.8 per cent).

Turning to home prices, in September 2018 four of the
capital cities recorded annual declines in home prices, up
from three economies for the year to the June quarter.

In terms of annual growth, five of the states and territories
had starts above a year earlier in the June quarter, up from
three in the March quarter. Dwelling starts in Tasmania are
up 29.1 per cent on a year ago to 7-year highs. Starts in
Victoria are up 24.3 per cent on a year earlier.
At the other end of the scale, starts in the Northern Territory
are down 29.3 per cent on a year earlier.

“NSW has taken back top spot for dwelling
starts from Victoria.”

The strongest annual growth in home prices was in
Tasmania (up 8.8 per cent), followed by the ACT (up 2.0
per cent), South Australia (up 0.8 per cent) and
Queensland (up 0.5 per cent).
Home prices were lower than a year ago in NSW (down by
4.8 per cent) from Western Australia (down 3.0 per cent),
Victoria (down 2.4 per cent) and Northern Territory (down
1.9 per cent).

“Wage growth in the year to June was
strongest in both Victoria and Tasmania (2.5
per cent)...”

6

 State of the States
ANNUAL GROWTH RATES

October 2018

LOOKING AHEAD

TREND ANNUAL GROWTH %
NSW
VIC
QLD
SA
WA
TAS
NT
ACT
AUST

Economic
Growth
4.7
5.9
4.8
5.6
0.9
7.1
-0.5
5.4
4.0

Retail
Trade
2.7
4.9
1.0
2.3
-0.7
3.0
1.7
2.5
2.5

Equip.
Invest
3.3
9.2
4.3
3.0
18.6
58.5
-2.9
51.5
8.2

Employment
3.4
2.6
1.6
1.3
1.0
0.6
1.2
0.4
2.4

NSW
VIC
QLD
SA
WA
TAS
NT
ACT
AUST

Constuct
Work
9.9
18.2
4.1
23.4
-0.8
5.2
-19.3
-0.1
9.1

Population
1.44
2.18
1.70
0.67
0.82
1.02
0.12
2.08
1.55

Housing
Finance
-9.2
-4.4
-6.4
-2.6
-16.8
3.6
-16.1
-6.8
-7.6

Home
Starts
8.1
24.3
3.4
5.6
-14.2
29.1
-29.3
-5.5
9.6

The State of the States assesses economic
performance by looking at the most recent result – such
as retail trade or construction – and compares that with
the ‘normal’ experience. And by ‘normal experience’, we
define this as the decade average.
A resident of the state or territory can therefore assess
whether they are experiencing relatively better
economic times. Comparing states or territories on the
same criteria determines which state or territory is
performing the best on a certain indicator.
But as well as relative economic performance, some are
also interested in economic momentum. That is, annual
economic growth. A state/territory may have been
under-performing, but if annual growth is rising, then
this suggests that performance has scope to improve.
On the eight indicators assessed, Tasmania tops
growth on four measures, ahead of Victoria (top on two
measures). South Australia and NSW lead the way on
one measure each.
When looking across growth rates for the states and
territories, Victoria exceeded the national-average on all
of the eight indicators from Tasmania (five) and NSW
and ACT (four).
At the other end of the scale, Northern Territory underperformed the national result on all indicators. Western
Australia out-performed the national growth rate on one
indicator.

If new vehicle registrations are added to the list of
indicators, then there would be no change to the economic
performance rankings. Victoria is the strongest on new
vehicle sales, up 17.1 per cent on decade averages. And
annual growth of sales is also the strongest in Victoria (up
3.5 per cent).
Last quarter Victoria topped the economic performance
rankings for the first time in the 9-year history of the
surveys. And in the latest quarter Victoria remains just
ahead of NSW. Both states have broad-based economic
strength, underpinned by population growth, construction
and investment activity.
There is little to separate Victoria from NSW. It is possible
the two states could exchange rankings over the next year.
Strong job markets provide support for local economies
although it is expected that home building will soften in the
period ahead.
NSW picked up one spot on dwelling starts but dropped
one place on unemployment. Victoria lifted three spots on
unemployment but eased one spot on both housing
finance and dwelling starts.
The ACT remains in third spot with changes in positions on
five indicators but little change overall.
Tasmania is still in fourth position but closing in on the ACT.
Tasmania has improved its relative performance on four
indicators.
South Australia lifts from sixth to fifth position. Queensland
has dropped in its relative position on four indicators. South
Australia shifted its relative position on a number of
indicators but especially lifted on business investment.
The Northern Territory remains in seventh spot with
Western Australia in eighth position. There has been
slippage for both economies in terms of the relative
positions with other economies.
Encouragingly unemployment remains low in Northern
Territory and there has been a drop in trend unemployment
in Western Australia and a lift in dwelling approvals.

7

 State of the States
https://www.commsec.com.au/stateofstates

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conclusions or recommendations are reasonably held or made as at the time of its
compilation, but no warranty is made as to accuracy, reliability or completeness. To
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123 124 nor any of its subsidiaries accept liability to any person for loss or damage
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CONTACTS
Craig James
Chief Economist
(612) 9118 1806
craig.james@cba.com.au
Twitter: @CommSec
Ryan Felsman
Senior Economist
(612) 9118 1805
ryan.felsman@cba.com.au
Twitter: @CommSec

Commonwealth Bank of Australia and its subsidiaries have effected or may effect
transactions for their own account in any investments or related investments referred
to in this report.

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