The Economic State of our States | ANZ Stateometer

The ANZ Stateometer, which measures economic performance across the states and territories, continues to highlight the uneven economic growth across the country.

• Economic activity across most of Australia edged higher over the year to January, according to the ANZ Stateometer.
• A key theme in this month’s release is the improved momentum in the mining states of Queensland and Western Australia. This suggests the weight of their downturns is easing in light of improved commodity prices and rising resource exports. Despite the improvement, activity in Queensland and Western Australia continues to expand at below trend pace, which in part reflects their very strong growth rates during the height of the commodity boom.
• Other states and territories have also seen improvement reflecting a pickup in business sentiment.
• The index for New South Wales was unchanged and momentum seems to have stabilised, as the state’s performance realigns with the average of the others. However indicators from NSW’s housing sector remain positive influences. Solid labour market conditions and a re-acceleration in the housing sector are supporting growth in Victoria, which is expanding at well above-trend pace.
• Improving labour market conditions are also providing more positive momentum for both South Australia and Tasmania while the index for the Australian Capital Territory has lost ground as job growth slows.
• Meanwhile, the steady improvement in labour market conditions continues to lift growth in the Northern Territory.

FIGURE 1. THE STATEOMETER FOR JANUARY 2017

MOMENTUM IN NSW STABILISES

• While the smoothed New South Wales index was unchanged, the actual index ticked higher in January, up for the second consecutive month. This suggests to us that momentum in the NSW economy has stabilised and is more in line with national trends.
• The acceleration in the housing market – supported by a combination of rising unit approvals, solid growth in housing finance commitments and strong house price inflation – was the main driver of the small gains. Indeed, the housing component in our index posted a positive reading for the second month in a row and signals that the sector is now expanding at above trend pace.
• The other sectors (household, business, labour and trade) also improved somewhat.
• Underlying data suggest the NSW index may also tick higher in February.

VICTORIA IS BUOYANT

• The Victorian index continued to trend higher in January and it now sits at the highest level since November 2010, well above its long-run average. This suggests to us that there is strong momentum in the state’s economy.
• The improvement in the index was broadly based, with a solid pickup in the housing sector leading the gains. The ongoing strength in the labour market and improving business conditions also contributed to the lift in growth.
• The underlying data suggest the index will likely improve further in February.

RISING EXPORTS SUPPORT GROWTH IN QUEENSLAND

• After twelve months of uninterrupted declines, the smoothed QLD index ticked higher in January. While the index remains well below trend, the recent pickup signals that falling momentum in the state may have ceased.
• The turnaround in the trade balance – and especially the sharp acceleration in the value of resource exports – has been the prime driver of the improvement. The other sectors (household, business, trade and labour) also improved somewhat, but remain well-below trend levels.
• Going forward, the upswing in trade should continue to add to growth. That said, the underlying data suggest some downside risks for February’s reading.

SOUTH AUSTRALIA’S GROWTH TICKS HIGHER

• The smoothed index for South Australia’s economy ticked higher in January. The index now sits at its highest level since mid-2015, close to the zero-mark, signifying trend growth.
• Conditions in the labour market remain solid and momentum has turned positive in the housing sector – supported by rising house prices and ongoing strength in finance commitments. Meanwhile, an improvement in business conditions is also adding to growth.
• The underlying data suggest that the index may edge higher in February.

MOMENTUM IS IMPROVING IN WA

• The index for Western Australia edged higher in January, up for the third consecutive month. While the index remains well below its long-run average, the improvement suggests that the state’s economic growth is no longer deteriorating.
• The improvement in the state’s labour market has been the prime driver of the turnaround in the index. In addition, rising export volumes and the recent pickup in resource prices are adding to growth. The trade component of our index grew for the fourth successive month. The improvement in business conditions is also encouraging.
• The underlying data suggest to us that growth in WA will edge higher in February, although any improvement will likely be moderate.

TASMANIA’S GROWTH EDGES CLOSER TO TREND

• Tasmania’s economic growth further improved in January and it now sits very close to trend levels.
• The better momentum has been largely driven by a tightening in labour market conditions. Encouragingly, SEEK job ads for the state suggest that employment growth is likely to remain solid over the coming months.
• The other components of the index (household, housing, trade and business) were little changed.
• The underlying data suggest that the index will likely improve further in February.

MOMENTUM REMAINS POSITIVE IN THE NT  

• After reaching a five-year low in April last year, the territory’s smoothed index has gradually trended higher and it currently sits at its highest level since August 2014. The index is now close to zero, signalling that the state’s economy is expanding at close to its trend growth rate.
•  A steady improvement in labour market conditions has been leading the gains – with the employment to-population ratio moving higher since March last year. In addition, momentum in the household sector seems to have bottomed and there are some signs of a pickup in consumer spending. The consolidation in home prices is also encouraging.
• The underlying data suggest the index will be little changed in February, close to trend growth.

THE ACT’S GROWTH CONTINUES TO SLOW

•  Economic activity in the Australian Capital Territory slowed in January, but remains well above its trend rate.
• The loss of momentum has been driven by a weakening in labour market conditions. However, the housing sector seems to be picking up.
• Underlying data suggest the index will likely slip further in February.

Source: ANZ Stateometer