Strong demand for new homes creates economic momentum for Tasmania

Tasmania has pipped Australia’s other states and territories in the rankings for economic performance for the first time in its own right since October 2009.

The apple isle is now leading the rankings in the latest State of the States economic report by CommSec, primarily due to above-‘normal’ growth in population and subsequent strong demand for new homes, as well as an improved relative performance of the job market and consumer spending.

The quarterly report looks at eight key indicators including economic growth, retail spending, equipment investment, unemployment, construction work, population growth, housing finance and dwelling starts, and compares the latest readings with decade averages.

According to the latest report, Tasmania ranked number one in four of the eight indicators, being relative population growth, relative unemployment, equipment investment and retail trade, and secured second position in two others.

CommSec chief economist Craig James said the strength of Tasmania’s housing market in recent quarters is now playing out in stronger retail spending and a strengthened job market.

Victoria’s ranking remains strong, but true impact of COVID-19 yet to be realised

Victoria took second place in the overall rankings, coming in first for both the economic growth and construction work indicators.

However, that could be challenged in future reports as a response to the COVID-19 obstacles it’s having to deal with at the moment, according to Mr James.

“Victoria is still very much right at the top of the leaderboard,” he said.

“But it will face challenges in coming quarters given the second lockdown in Melbourne and the impact that has on the Victorian economy.”

The ACT came in at number three, with strength in the housing sector providing momentum for its economy. It landed the number one position for both the housing finance and dwelling starts indicators.

New South Wales ranked third or fourth on most of the indicators, but Mr James said its economy may get “a bit more upward momentum” from some of the infrastructure projects currently underway across the state.

In fifth position, Queensland has seen its most marked improvement in unemployment.

“In terms of relative unemployment, we’ve got Queensland in second position,” Mr James said.

“Given the success that Queensland’s had in terms of the lockdown, what we may see is Queensland improving some economic momentum in coming quarters as well.”

South Australia is sixth in the rankings, losing ground in the last quarter particularly in business investment.

According to Mr James, Western Australia is seeing “a degree of improvement” in some of its rankings.

“In fact, it ranked second in relative economic growth and relative investment,” he said.

“And of course, for both Western Australia and Northern Territory, the strength is very much in the export sector. Things like iron ore and natural gas remain very much in demand by other countries across the globe.”

Economic ranking of vehicle sales steady across the board

The report suggests that if rolling annual new vehicle sales were added to the list of indicators, there would be no change in the economic performance rankings.

The ACT is the only state or territory where annual new vehicle sales are above ‘normal’, up 4.8 per cent on the decade average. It is also the only economy where new vehicle sales are up on a year ago, by 6.8 per cent.

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