Australia’s Ever Changing Economy; Have Sydney and Melbourne Peaked?

The Commonwealth Bank of Australia, in case you didn’t know, is one of Australia’s big four banks. Commonwealth Securities, also known as CommSec, is an Australian online stockbroking firm operated by the Commonwealth Bank.

I’m sure you’re grateful of introduction, but why should we care?

Because every three months, CommSec produce a report called ‘State of the States’, something they’ve been doing for nine years now. I’ve been reproducing the results of these reports here on this website every July since 2014, and back then, Western Australia were the kings of the economy.

State of States July 2014

states 2014I decided to look even further back and found evidence on scribd of the January 2010 report which had the ACT and Western Australia equal first.

State of States July 2010

states 2010Even that report, if you click through the above link to the source, refers to the results three months previously which had Tasmania in top spot ahead of South Australia in second.

During the last three years though, 2015 – 2017, New South Wales has owned the top spot with Victoria in second. There is no doubt in my mind that these two states have been the powerhouses of Australia during this period.

But of course we live in the here and now, so let’s look at the now.

State of States July 2018

Well, New South Wales and Victoria still claim the top two spots, but with one important difference.

For the first time ever Victoria has topped the list, pushing NSW into second.

states 2018The highlights of the winners and losers are clear to see in the above graphic, but before I look into them further, here’s a brief word about how Commsec arrive at their results.

Eight key indicators

CommSec look at eight key indicators when creating this report, and they are economic growth, retail spending, equipment investment, unemployment, construction work done, population growth, housing finance and dwelling commencements.

Each of these states and territories gets ranked for the eight key indicators, from 1–8, and the above graphic shows what each has done well and not so well.

10 year trend

As I’ve mentioned in previous posts though, CommSec look at the trend, comparing current performances with the decade averages.

So, for example, if a state had a decade average unemployment rate of 10%, and then at some point reduced that to 5%, that would reflect as a massive 50% improvement. On the other hand, a state with historically 3% unemployment which had drifted out to 4%, would show a decline of 33%.

The poorer performing state though would still have a lower current unemployment rate than the ‘apparent’ better performer.

State of States July 2018 performance highlights

Here’s how the states and territories are performing right now in terms of strengths and weaknesses, with last year’s positions in brackets:

  1. Victoria (2) – came top in economic growth, construction work, population growth, dwelling starts, and second in housing finance and retail spending. That’s quite a sweep, but it’s also worth noting they are fourth for unemployment with the current rate of 5.3%.
  2. New South Wales (1) – are top for retail spending and unemployment, and second on economic growth, construction work and dwelling starts. They are down to fourth though on population growth, and is worth noting they have a current unemployment rate of 4.8%
  3. ACT (3) – grab the remaining two top slots for equipment investment and housing finance, but came a lowly fifth for economic growth. It has the lowest current unemployment rate though at 3.5%
  4. Tasmania (=4) – population growth was at 0.94%, 65% above its decade average rate. Not much compared to Victoria’s 2.3%, but a lot for Tassie. The unemployment rate is currently 6%,
  5. Queensland (=4) – came third in population growth and fourth in dwelling starts, other than that, must do better. The weather’s been great though. Unmployment is currently at 6.1%
  6. South Australia (6) – came third for unemployment at 8% below the decade average and have also moved up into fourth position for construction work. Current unemployment rate is now 5.6%.
  7. Northern Territory (7) – despite this lowly position, they are third for economic growth and construction work. Biggest problems in NT are population growth and dwelling starts, they are bottom for both. Current unemployment rate is a rather healthy 4.1%
  8. Western Australia (8) – bottom for economic growth, unemployment, construction work, and second from last for retail spending and housing finance, it’s looking grim out west. It also has the country’s worst unemployment rate at 6.2%. Is there a glimmer of hope?

Mining

Yes, apparently.

The ‘boom and bust’ industry of mining is very much in bust mode at the moment, but there are some suggestions the downturn may soon reverse. If that becomes the case, it will certainly help Western Australia as well is the other mining states, Queensland and Northern Territory.

We shall see.

It’s Sydney versus Melbourne again

It seems to me, and this is only my opinion, that the economic strength of both Victoria and New South Wales is mainly driven by population growth. I did some googling, and found a fascinating article about population growth in Australia.

Apparently, Melbourne, Sydney and Brisbane accounted for 70% of the country’s population growth during the financial year 2016-17.

Sydney is still our largest city with 5.1 million and its population grew by 102,000 in that year.

Of that, overseas migration accounted for about 85,000 and natural increases (you know, what’s it called… childbirth) accounted for an additional 35,000. That, of course, is 120,000, which only means one thing.

18,000 people MOVED OUT of Sydney to live somewhere else in Australia.

Melbourne is our second largest city with 4.9 million population. During the same year it recorded its highest net population growth of 125,000. 80,000 were from overseas migration, 36,000 from natural increases which means that around 9,000 MOVED TO Melbourne from elsewhere in Australia.

For the record, Brisbane’s population increased by 48,000, in rounded numbers 18,000 for each of overseas migration and natural increases, with the other 12,000 moving to Brisbane from elsewhere in Australia.

It’s my opinion people are moving out of Sydney because the housing is too expensive and it’s becoming overcrowded. Very soon, Melbourne’s houses will be too expensive and the city overcrowded. Some might say it already has.

Maybe the days of Victoria and New South Wales being the powerhouses of Australia are coming to an end?

Something to think about, and maybe even more likely if mining really does take off again in Western Australia, Queensland and NT. You may well laugh, but remember, in 2010 ACT and Western Australia were joint top with Victoria in sixth and New South Wales stone last. And just four years ago, Western Australia were top with Northern Territory second, and look where they are now.

So who knows who will be where in another eight years time, or even four.

To read last year’s report and get access to links to previous reports, please visit my page Australia’s Economy: CommSec’s State of the States Report July 2017.

My thanks to the ABC for the migration numbers and even bigger thanks to CommSec for their latest report.

Get the full CommSec report

To download their report in full in PDF format, click on State of States July 2018. Well worth a full read.

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{ 4 comments… add one }
  • Peter August 7, 2018, 10:54 pm |

    Australia is finished.
    And you are an idiot, ‘Bob’.

    • BobinOz August 8, 2018, 8:54 pm |

      Fascinating insights Peter. Thanks for taking the time to share all your wisdom.

  • Joanne August 2, 2018, 4:14 pm |

    Heard on the radio this morning that the house prices in Melbourne had slumped.

    We have been renting for 2.5 years and saw our neighbour’s house increase in value around 250k since they bought it a little before we moved next door as the area has been snatched up by developers to build overpriced units. Prices have been daft so for us we hope they start going down soon else we will never be in the position to buy.

    • BobinOz August 2, 2018, 9:03 pm |

      Yes, I read about that yesterday as well, and apparently Sydney’s house prices are falling even more the Melbourne’s. Hard to get on the property ladder when prices are like this, so hopefully they will continue to ease.

      Instead of waiting though, why not moved to Brisbane, much cheaper up here 🙂

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