If there is one example that demonstrates Australia’s economic transition away from mining investment-led growth to that powered by the non-mining sectors of the economy, it can be found in the chart below.
It’s the ANZ’s monthly ‘Stateometer’ for October, a gauge of economic performance that uses 16 individual indicators to provide a timely pulse of activity across the nation.
Those states in the top right quadrant are growing above trend, and accelerating. Those in the bottom left quadrant are growing below trend, and decelerating.
Clearly there is a widening divergence emerging with non-mining states generally growing at or above trend – and accelerating – while mining states languish at ever-increasing sub-trend levels of growth.
Kirk Zammit and Cherelle Murphy of ANZ, the authors of the report, believe economic performance across the country is now divided into two distinct groups – East and West.
“The October ANZ Stateometer shows that economic activity across the non-mining states has continued to improve. Indeed, economic activity has picked-up noticeably since June, in particular due to acceleration in the NSW economy,” the pair wrote in a note released this morning.
“Still-strong residential construction activity, services-led employment growth, buoyant business conditions and pockets of commercial property activity have been the key ingredients to NSW and Victoria’s economic performance. These sources of growth are also becoming more apparent in Queensland and Tasmania.”
While the eastern states are looking good – largely due to their dominant services sector and residential construction sectors which are benefiting from the lower Australian dollar and record-low interest rates – it’s a different story for the states and territories further west.
“Economic performance has remained more-or-less constant in the Northern Territory since June,” they note.
“South Australia’s economy has been growing below trend since around 2011 as it undergoes structural change, while Western Australia is continuing to adjust after an extremely strong decade that started to turn in 2013 when resources construction started to decline.”
While the performance between east and west is continuing to diverge, Zammit and Murphy suggest that may reverse in the year ahead as activity in the New South Wales and Victorian property markets cools.
“The housing outlook, however, suggests in 2016 there may be some slowing in the upward trajectory in NSW and Victoria in particular. This is due to softer house price growth and a levelling off in construction activity.
“It is also likely that in 2016 the lower Australian dollar won’t provide the same assistance to those states that have been enjoying its support through 2015,” they note.