Monday, July 18, 2011

Multi-speed or two-speed, NSW looks sick

NSW is vying with flood-ravaged Queensland for the bottom spot in the latest CommSec economic league table, slipping below previously weak states such as South Australia and Tasmania.

The quarterly report puts the NSW economy last or near last on most of the measures assessed by the stock broker, and a narrow second-last to Queensland overall.

“Queensland has been hit by once in a generation floods and cyclones. It is understandable that it is struggling,” said CommSec chief economist Craig James.

“But for NSW the problems are deeper. Nearly every other state has had something to propel growth, whether it be housing in Victoria and the Australian Capital Territory or mining in Western Australia. NSW has weak on planning, weak on delivering infrastructure to the places that need it, weak on building railways to the houses that will need them. There is a new government in place now and there should be no excuses.”

The CommSec table puts Western Australia in number one position as the best economy, with the Australian Capital Territory in second place.

The table measures performance relative to historical averages rather than absolute performance... a methodology that disadvantages traditionally strong states such as NSW.

“We are trying to find how each economy is performing compared with its normal,” said Mr James. “Just as the Reserve Bank does with interest rates, we have used decade-long averages to to decide what is normal.”

NSW is at the bottom of the pack when its economic growth is compared to its decade average, with growth just 9 per cent higher. Western Australia’s is nearly 30 per cent higher. NSW is near the bottom of the pack on retail spending with current spending 12 per cent higher than the decade average compared to 22 per cent for Western Australia.

For home building NSW is 17 per cent below the decade average whereas the leader, the Australian Capital Territory, is 80 per cent above it.

“NSW has not had a government focused on these things. Victoria, now in third place, could soon climb to the top. You have to ask why Victoria, why not NSW and the answer has to be NSW needs to be focusing more on getting people coming in to the state, keeping down the cost of living and keeping down the cost of housing.”

“The new government does want to do that but people want to see results. They are what it will be judged on.”

Treasurer Wayne Swan acknowledged Sunday parts of the economy were weak.

“We are seeing out there a cautious consumer but the fundamentals underlying our economy are strong,” he told Network Ten. “We have the strength to withstand adverse international events, although we are not entirely immune from them.”

Published in today's SMH and Age

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