Monday, October 24, 2011

CommSec: Adjust your maps, we're three-speed

Australia is no longer a two-speed economy. Commonwealth Securities says we're now “three-speed”.

“Western Australia is in a group by itself,” the stockbroker says in its State of the States report released this morning. [MON] “The next level comprises the Australian Capital Territory, Victoria and South Australia, then there is a gap before the next four: Tasmania, NSW, Northern Territory and Queensland.”

NSW slots into the also-ran category by virtue of appalling weak economic growth compared to historical averages and other states. Growth in the June quarter was just 8 per cent above the NSW decade long average compared to 28 per cent in Western Australia, 21 per cent in the ACT, 16 per cent in South Australia, and 12 per cent in the second-poorest performer Tasmania.

Retail spending in NSW was up just 11 per cent on the decade long average, compared to 20 per cent in the leading state Western Australia.

Dwelling commencements were down 18 per cent on long-term averages while those in Victoria were up 28 per cent and in the ACT up 82 per cent.

“NSW is struggling to find an X-factor that will drive growth,” said CommSec chief economist Craig James. “It has above average population growth, but so does the ACT and Western Australia"...

The CommSec methodology disadvantages traditionally strong states such as NSW by comparing their current performance to their historical averages. Mr James defends the method by saying it is how the Reserve Bank assesses interest rates. "Just as the Bank does with interest rates we use decade-long averages to decide what is normal," he says.

South Australia and Victoria, both traditionally weaker than NSW, look exceptionally strong when measured against historical performance.

South Australia’s construction work is up 40 per cent on the long-term average, Victoria’s 25 per cent, and NSW just 15 per cent.

Mr James told the Herald the state’s prospects might be about to turn up. “The new government has committed itself to getting more homes and units built, that should spark retail spending and employment as it did in Victoria. And the benefits of the mining boom might start to roll. NSW might move into the second tier, but a lot would need to go right. At the moment it is more of a Tasmania than a Victoria,” he said.

Published in today's SMH and Age


CommSec rating, strength


Western Australia - economic growth


Australian Capital Territory - home building
Victoria - dwelling starts, retail
South Australia - construction


Tasmania - employment
NSW - population
Norther Territory - employment
Queensland - investment

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