Australia’s Economy: CommSec’s State of the States Report July 2017

If this were a horse race, the commentary as they crossed the line would probably go something like this:

NSW romp home having led from start to finish, gallant effort by Victoria towards the end to grab second slot. ACT simply ran out of legs after a promising start.

There’s a bit of a gap to the rest of the field, with little to separate Tasmania and Queensland who crossed the line together in fourth. South Australia and Northern Territory were not too far behind in sixth and seventh places with a further gap to Western Australia who finish last.

Yes, it’s time for the latest State of the States report.

CommSec’s State of the States

state of states 2017CommSec’s State of the States reports are released every quarter, but I like to take a look at them annually in July as we embark on a new financial year. I think they make interesting reading for anybody considering moving to Australia as well as for those already living here.

I’ve said it many times on this website before, Australia may be one country, but it really should be regarded as eight separate economies. The fortunes of each of our states and territories vary significantly and these reports look at eight key indicators before ranking the state of the states.

Here’s where it gets a little messy though, as Craig James explains in a video coming up shortly. “We drive the rankings by looking at eight key indicators of the economy; we look at the current readings and we compare that with the normal for the decade average.

Here’s why that makes this a little messy.

Go where the work is

I’m often asked by readers where I think they should head to, as in which state or territory. I often suggest they go where the work is, assuming they need to work when they get here. I think these key indicators can help people decide where to go. For example, when looking at these State of State reports, if you work in the retail trade or construction, look for a state that has a plus (+) for that key indicator and avoid a negative (-) sign.

Except it’s not that simple.

simple mathsLet’s look at the key indicator of unemployment to explain what I mean.

If you look at the map towards the top of the page, Western Australia, Victoria and South Australia all have the same weakness, and it’s unemployment.

The current unemployment rates for each of the above are:

  • Western Australia – 5.6%
  • Victoria – 6%
  • South Australia – 7%

Now let’s look at the current unemployment rates in the other five states and territories:

  • Northern Territory – 3.1%
  • Australian Capital Territory – 4.4%
  • New South Wales – 4.8%
  • Tasmania – 5.8%
  • Queensland – 6.3%

So, as you can see, Western Australia, with their negative for unemployment has a lower unemployment rate than both Tasmania and Queensland. Victoria, with its negative, still has a better unemployment rate than Queensland.

This is because of the decade trend. Western Australia, for example, has an average unemployment rate of 4.7% over the last 10 years, so the current rate is 19% higher than the ‘norm’. Whereas Queensland’s unemployment rate of 6.3% is only 13.6% higher than their ‘norm’.

There, that’s cleared that up.

There is no doubt though, that South Australia is the one state in Australia that really is struggling with jobs. Similarly, it is also clear and undeniable that Northern Territory has the lowest unemployment rate in the entire country, whether you are looking at this quarter’s figures or comparing them with “the normal for the decade average.”

It does get a little messier though

Whilst Western Australia, Victoria and South Australia get a negative for unemployment, Australian Capital Territory does not. Well, with a reasonably healthy 4.4% unemployed, the second lowest in the country, why should it?

Because, historically, the unemployment rate in the ACT “is actually 18.2 per cent higher than the decade average of 3.7 per cent. So the ACT has eased from fourth to seventh on the unemployment performance ranking.

It is in seventh position yet doesn’t get a negative? Whilst Victoria (decade average +7.8%) is in fourth position and South Australia (decade average +16.9%) in sixth, and they do?

I can only assume that CommSec use some kind of complicated algorithm when finalising their rankings, one that clearly goes over the top of my head.

Having said all that, whilst it may be messy, the information in these reports is both fascinating and useful. In the past, when I’ve written about these reports:

I’ve always talked a lot about the results and the winners and losers. This time I decided to explain exactly how CommSec come to the conclusions they do.

I think I failed. As my old school teacher used to say in my school reports, ‘Must try harder.

Nonetheless, I still think this report is worth a look, clicking the following link will open the PDF immediately:

Or read the report online:

I will leave you with some of the reports highlights from somebody who almost certainly does know how it all works…

It sounds so straightforward when he says it.

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