Australia’s north-west / south-east divide

The state of the states

Interesting as usual, the Newcomers’ Network May newsletter led me to Saul Eslake’s (ANZ Chief Economist) comments about jobs, business and wealth moving from the south east – where most of the population lives – to the north and west, where the China-driven resources boom is centred. I found it a fascinating overview.

W A – boomtime

• After the 2000-01 recession WA has grown at an average annual rate of 5% and is forecast to grow at 4.5% over the next four years;
• WA’s unemployment rsate has fallen by two percentage points since 2003 to 4%;
• WA residents in the next two years will move ahead of NSW and Victorian residents to have the highest per capita household disposable income in Australia (apart from the ACT).

Queensland – also doing well

• Economy has grown at 5.25% pa over the past four years and is expected to remain at close to 4.5% for the rest of the decade;
• Qld has genereated nearly one third of all new jobs in Australia over the past two years, despite having only one fifth the population;
• Unemployment, traditionally higher than the national average, is now just below it at 5%;
• Taking into account Qld’s dramatic population growth, its economic performance is nowhere near as impressive as WA’s;
• Qld average household incomes second-lowest in Australia – because it is a low productivity economy. Output per hour worked is 13% lower than the national average;
• Rural and Tourism sectors (bigger than WA’s) hurt by the strong A$ though the mining industry has benefited from the commodities boom and investment.

N T – picking up

• Surprisingly weak for most of the decade with growth averaging less than 1% in 2000-01 and 2003-04 and unemployment averaging nearly 6%;
• Economic growth expected to average 7% this financial year and 6% next year;
• Darwin house prices rising almost as fast as Perth.

NSW – under-performing

• Economy grown by less than 2% over the past four years;
• Employment grown more slowly than any other state, now unemployment is nearly half of one percentage point above the national average;
• Housing activity at comparable rates to the 1990s but NSW dwelling starts are down to less than two thirds 1990s average;
• Morris Iemma has reversed Bob Carr’s ‘Sydney’s full’ mantra and now, partly as a result, the state seems to be not deteriorating as sharply, relative to the rest of the country;
• Trend set to continue for some years.

Victoria – doing quite well ‘considering’

• Although deriving almost no direct benefit from the resources boom, the economy has grown at 3.3% pa on average over the past three years – slightly faster than the national average;
• Over the past two years Vic has accounted for one in every four jobs created nationally – more than any other state except Qld;
• Economy will grow a little more slowly than the national average over the next few years, but by a smaller margin than NSW;
• Melbourne may struggle to prevent loss of mining company headquarters to Perth.

S A – wine glut hasn’t helped

• Despite having the world’s largets uranium mine and Australia’s bigest copper mine at Roxby Downs, like Victoria, SA has little to gain from the resources boom;
• The ‘wine glut’ and uncertainties over motor vehicle manufacturing haven’t helped;
• Economy has grown around 2.5% pa over the past four years;
• Unemployment has drifted up by about half a percentage point to 5.5% over the past year;
• Population outflow to other states is accelerating;
• Though SA’s budgetary position is much improved from the 1990s, it is arguably the weakest of any state.

Tasmania

Exception to ‘weak south-east / strong north-west’

• Economy has grown by nearly 3.5% pa over the past four years, exceeding the national average; in per capita terms it has grown faster than any other state other than WA in this time;
• Tas is the only state other than WA and Qld in which employment growth has exceed 3% pa over the past four years.
• ‘Hidden job-seekers’ re-entering the workforce have kept the unemployment rate above 6%;
• Tassie’s strong enconomic peformance has been driven, to some extent, by its ‘discovery’ by house hunters from Sydney and Melbourne;
• The recovery also reflects a decade of good economic management – lacking for the previous 30 years;
• Tas remains Australia’s poorest state though by a smaller than at any time since the 1980s.

Saul Eslake’s conclusion:

The key challenge for the resource-rich states is not to indulge in wasteful spending and for the others a key issue is how to deal with the consequences of an exchange rate that will undermine the competitiveness of their traditional strengths.