The ABS recently released annual data on the performance of each State and Territory economy, known as Gross State Product. This is the most complete measure of economic activity by state because it takes into account each State and Territory’s share of international trade (more frequent data can only tell us the State where exports or imports hit the docks, which is not always where those exports/imports were produced/consumed).
The data highlighted that mining states were still the fastest growing economies in 2013-14, although growth has slowed in both WA and Queensland since peaking in 2011-12 (Figure 1).
Western Australia remained Australia’s fastest growing state in 2013-14, notching up annual inflation-adjusted growth of 5.5%. Queensland also kept its ranking of second place, growing by 2.3% over 2013-14 in inflation-adjusted terms, although growth there has slowed markedly since 2011-12 and is only a touch faster than NSW, which grew by 2.1% in 2013-14.
South Australia kept its title of the mainland’s slowest state economy, growing by 1.3% in 2013-14, but this was faster than growth seen in 2012-13 of 0.9%. The two largest states, NSW and Victoria, which together account for 53.2% of national GDP, posted another year of below-trend growth in 2013-14.
It is also important to look at how living standards have changed. Economists use real incomes per capita as the main indicator used to measure changes in material living standards because this measure looks at the income received for the state’s output as well as population growth to see if households’ economic wellbeing has really changed.
This measure also portrayed a lacklustre performance through 2013-14 (Figure 2). Queensland recorded a 1.1% decline in real incomes per capita in 2013-14, even though aggregate GSP grew firmly. This reflects the falls in commodity prices that Queensland produces. Both NSW and Victoria recorded declines of 0.5% in real income per capita, indicating they were hit by softer export prices but not to the same extent as Queensland. In a welcome sign, Tasmania saw a 0.4% rise in real income standards per year, following several years of declining living standards.
Overall, the weak real income per capita growth data are consistent with the period of below average consumer confidence seen over the past nine months in the Westpac Consumer Confidence survey. Looking ahead, leading indicators suggest employment growth will strengthen, which will eventually lead to a fall in the unemployment rate. Together with wealth effects from strong house price growth, this should work to improve consumer confidence and spending through 2015.
Read more about this subject and other recent data and economic developments in this week’s Ai Group Economics Weekly Update.