Victoria has toppled Tasmania as the country’s highest-performing economy according to CommSec’s State of the States report.
Victoria returned to the top spot for the first time since April 2020, CommSec chief economist Craig James said, with Tasmania dropping to third place.
James said Victoria owed its high score to strong job creation, with unemployment in the state sitting at 3.2 per cent.
He said unemployment figures in Victoria were the strongest since records began in the 1970s.
With most Victorians in a job, they were able to spend and build property – two of the other economic indicators tracked by the ranking.
Victoria was ranked number one for unemployment and retail trade, and then second in terms of construction work and housing finance. It came in third place on dwelling starts.
“You can see that it all flows through from the fact of having a very good relative situation with unemployment,” James said.
While Victoria had moved to the top of the economic leaderboard, James said there was little to separate the top four economies.
Moving from equal-fifth place on the leaderboard to second, the Australian Capital Territory also leapt up the ranks.
James said business investment and housing finance were the two big drivers of the ACT economy. A construction boom in the territory was also contributing to its high score, he added.
Queensland had also held strong positions in recent State of the States reports, James noted, and came in at fourth place this quarter. He said the state’s strong population growth was fuelling its economy.
Looking forward, James said there were few factors influencing economic performance at the state and territory level.
“In terms of future economic performance, much will depend on how economies are affected by growing COVID case numbers and also how they respond to a period of rising interest rates.”
Any of the top four economies could take out the crown next quarter, although the report flagged Queensland’s higher-than-average growth rates on the eight indicators as reason to think the state might emerge on top next quarter.
How are the states ranked?
Every quarter, the bank captures the relative performance of state economies based on eight key indicators:
- Economic growth
- Retail spending
- Equipment investment
- Construction work done
- Population growth
- Housing finance
- Dwelling commencements
Rather than looking only at growth figures – which would see the most populous states topping the charts every quarter – the report looks at what is normal for the economy over a decade average.
It then compares the latest reading with the decade average, allowing the bank to compare states like-with-like.