Mainland Australia closes in on Tasmania’s economic ranking

Commonwealth Securities quarterly State of States report has found Tasmania tops the country in the economic battle against COVID for the ninth consecutive quarter. But the report also revealed the state was losing ground, as mainland Australia recovers from the pandemic.

CommSec chief economist Craig James said all of the country’s states and territories were performing well in these challenging times.

“The opening of local and foreign borders will likely present both challenges and opportunities in coming months, with Queensland and Western Australia most likely to benefit from the opportunities presented,” Mr James said.

“Victoria, South Australia and Western Australia each led the rankings on two indicators, while Tasmania led on just one indicator – down from four indicators in the previous survey.

“Queensland is now in equal third position with Western Australia. It is the highest ranking for Queensland in eight years, while Western Australia has equalled its best ranking in 7½ years.”

The report found Tasmania was losing ground leading on just one indicator, compared to four indicators in the previous quarter, and placed either second or third on five other indicators.

“It is now possible that Tasmania will be challenged for the top spot over the next six months,” Mr James said.

How the states’ economic measures fare

The report highlighted annual changes in economic indicators to provide a measure for economic momentum.

Of the eight indicators assessed, dwelling commencements, unemployment, population growth, economic growth, equipment investment, housing finance, retail spending and construction work, all states and territories (except Northern Territory) topped the leader board on at least one indicator.

Victoria ranked first on both retail spending and housing finance, which saw a 67.3 per cent jump in the decade average recording $6.4 billion in the last quarter, while NSW ranked second on housing finance that went up 60 per cent over the decade average to $6.93 billion this quarter.

Tasmania ranked first on equipment investment at $363 million this quarter up 62.5 per cent on the decade average, and second on construction work done, and ranked weak in terms of housing finance at $270 million this quarter.

As the pandemic saw a surge in city dwellers escaping to the regions, the report ranked Queensland first on relative population growth and weak on equipment investment down 2.8 per cent on the decade average. However, housing finance was up 55 per cent on the decade average marking $3.8 billion this quarter.

While South Australia came in on top when looking at construction work and dwelling start, it also saw an uptick in housing finance up 40 per cent on the decade average to $1.08 billion this quarter.

ACT ranked second on dwelling starts and saw $176 million on equipment investment up 30.5 per cent on average over the decade. Housing finance remained up on the decade average up 52.6 per cent to $477 million this quarter.

Western Australia ranked weak on housing finance despite solid growth up 40 per cent over the decade and recording $2.07 billion in this quarter. The state came in on top of relative economic growth.

The NT lagged behind coming in fourth on relative economic growth, but saw growth in housing finance over the decade up 12.6 per cent.

Housing affordability across the states

While all states reported growth in housing finance, affordability remains below its long-term average, according to Bluestone Home Loans’ mortgage affordability index.

The data revealed home affordability had “finally” steadied, with its mortgage affordability index coming in at 96.6 in February – the same result as the January quarter.

Across the states the report found most states had reported slightly negative affordability indices over February, while ACT, Western Australia and South Australia went up, reflecting falling affordability in those states.

Despite steady results over the February quarter, NSW and Victoria continue to report the steepest declines in affordability over the past 12 months, with NSW remaining the clear state leader in home loan unaffordability reflected by the high-priced Sydney housing market.

[Related: Australian property market: 'Finally hit the wall']