Australia’s growth remains pretty good, travelling at rates that remain slightly above trend. This nation is happily slipstreaming a rebound in China’s ‘old economy’ sectors, while a related jump in commodity prices has led to the first good news on national income growth we’ve seen for some time.
At home the Reserve Bank has cut credit costs to new lows, State governments are spending on infrastructure, petrol prices are still cheap , and the $A has encouraged more tourists to visit and more students to study there.
In turn, that healthy backdrop has allowed a relatively soft landing in the pace of population growth (to the benefit of retail), while ‘lower for longer’ interest rates have boosted prospects for housing construction, housing prices and for retailers too. But too many things Australia depends on are now priced for perfection, and the higher go the prices for iron ore and coal and homes in Sydney and Melbourne, the greater the risk that something goes wrong down the track.
And those higher risks come atop some known negatives: business investment spending is still falling fast as old construction projects wrap up without similarly-sized ones starting up, apartment construction is riding for a fall, while the $A keeps bouncing off the canvas. That says today’s output growth looks solid in the short term, but that the risks to that outlook – already higher than average – are continuing to edge up.
Here’s a breakdown of Deloitte’s analysis for each Australian state
NSW has got its mojo back thanks to the shift to lower interest rates and a lower Australian dollar. But its economy is being propped up by housing, and a number of the factors that are good news for NSW’s economy today are likely to be rather less good for it in the years ahead
Victoria and Queensand
Victoria and Queensland continue to punch above their weight amid a growth dividend from exchange and interest rates. Yet, despite the strongest population growth in the nation, there are clouds on the horizon, including over-building of apartments and the closure of car manufacturers
South Australia isn’t exactly setting the world on fire, but nor is its performance as bad as it is often portrayed. Unemployment rates have fallen, while infrastructure spending and submarine building help the outlook. But State demographics are poor and there are more challenges ahead
Western Australia’s pain of the moment is very real and can be seen in almost every economic indicator. With resource projects still reaching completion, the mining "construction cliff" in the West will get worse. But today’s pain still looks like being a pothole in growth than a crevasse
The economic data jumps around more for small States than it does for larger ones. But, looking through that fog, we see Tasmania’s economy as still being headed on a low-but-stable growth path, dogged by demographic headwinds, but aided by interest and exchange rate tailwinds
The Northern Territory is slowing as its biggest construction project has reached its final phase. That means there will be some tricky times for the Territory to traverse in the near future. While exports will rise they won’t result in as much help to jobs or to Top End population growth
Canberra’s economy has been boosted courtesy of the gridlock on Capital Hill, and a slew of the Territory’s economic indicators are looking better. Both retail and housing have been on the up. Chances are further budget repair will cause problems, but it’s not likely to be happening soon