Economic and Financial Market Update: State Of The States

Summary:

• Tasmania had the strongest economy in the 2019 financial year;

• But over the past decade it is WA that has taken the economic growth crown;

• Much of the decline in household saving has happened in Victoria;

• Industry composition plays a role in economic outcomes.

Countdown was an iconic Australian music program of the 1970/80s. It was one of the first shows in the world to regularly use music videos. One of the features was that at the end of each program it finished with a top ten hits (counting back from number 10). The interest was which song would be 'top of the pops'.

The Tasmanian economy was clearly the top of the economic state pops in 2018-19. And the 'official' numbers were consistent with many other indicators. Business sentiment has been strongest in Tasmania. It is the only state where the number of residential building approvals is still growing. My discussions this year with Hobart clients had a more optimistic hue than those with clients in other states.

While Tassie led the way, Victoria still did pretty well. NSW was slowing. WA bought up the rear, still dealing with the end of the mining boom.

This was the first year that Tassie has been 'top of the pops' since the data began to be compiled in 1991. SA has also only been the strongest state once (2001). A lot of focus has been on the strength of the NSW and Victorian economies. But those states outperformance has been a recent phenomenon (2015-17, although Victoria also topped the charts in 1998). Ironically the two states that usually lead the way (Queensland and WA) were also the two that grew the slowest in the 2019 financial year.

Economic performance can jump around year-to-year. But improved living standards requires sustained good rates of economic growth. Over the past decade WA had the strongest economy, with the mining-boom powered early years more than offsetting the weakness of recent years.

Historically WA has been jostling with Queensland as having the strongest growth rates. But over the past decade Queensland's performance has been closer to average. Due to the relative size of their economies growth in NSW and Victoria typically drives the national average.