Monday, July 26, 2010

Thank heavens for population growth

Population growth is the only bright spot in an in an otherwise bleak assessment of the NSW economy which rates it number 7 out of Australia's 8 states and territories - a distinction it shares with Queensland.

This morning's Commonwealth Securities "State of the States" report ranks NSW the worst or second-worst state when it comes to economic growth, retail spending, employment, construction activity and dwelling starts.

"Population growth is really the state's only economic driver," said CommSec chief economist Craig James. "Immigrants come mainly to the key centres of Sydney and Melbourne and they tend to stay."

In NSW population is growing at 1.64 per cent, well above the decade-long average of 1.1 per cent and about double the pace of recent years.

"We do have a problem providing services and land for the extra population, but without it we would have little going for us," said Mr James.

"Even the Australian Capital Territory has economic driver in the dwelling sector... but in NSW we haven't had much of a mining sector, we haven't had the dwelling sector, our finance sector has been going backwards and even tourism hadn't provided an impetus."

"Immigration is about the only thing driving the state's retail spending, its dwelling investment and business investment. If immigration was cut, NSW would have the most to lose."

The survey ranks economies on their current performance compared to long-run averages. The methodology works against states such as NSW and Queensland which led Australia in earlier decades.

The number one state in the survey, Western Australia, is exceeding its decade-long economic growth rate by almost 30 per cent. NSW is performing the weakest in relative terms, exceeding its decade-long average by less than 15 per cent.

A separate survey by economic consultant BIS Shrapnel also released today predicts a return to growth in the NSW residential construction "coming off a very low base".

The study nominates slower population growth and the withdrawal of government stimulus payments as "the two major drags on economic growth" in the coming year.

BIS Shrapnel is forecasting a sharp cut in net migration to 175,000 in 2011, the lowest rate in five years following earlier changes to migration rules. In 2012 it expects net migration to slide to 145,000.

Published in today's Age 

CommSec State of the States July 2010

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