After propelling economic growth in the second half of 2015, New South Wales and Victoria, the most populous states in Australia, now appear to be slowing, pointing to the likelihood of a moderation in growth across the broader Australian economy.
That’s the takeout from the latest Stateometer report released ANZ earlier today with the bank noting that the slowdown is being driven by a cyclical slowdown in employment and housing sector indicators across Australia’s eastern states.
For those who have not heard of this indicator before, the Stateometer is a gauge of economic performance that uses 16 individual economic indicators to provide a timely pulse of activity levels across the nation.
As opposed to Australia’s official GDP figures from the ABS which are often dated, the Stateometer aims to provide as close to a real time indicator on current trends in the Australian economy.
The chart below, supplied by Kirk Zammit of ANZ, reveals the economic performance of each state and territory in March. Those states and territories in the top right quadrant are growing above trend, and accelerating, while those in the bottom left quadrant are growing below trend, and decelerating.
As it reveals, while New South Wales and Victoria are currently growing at an above trend pace, both states have recorded a substantial deceleration in economic activity based on recent data.
All other states and territories are currently growing at a below trend pace, with only the ACT, South Australia and Western Australia seeing levels of economic activity improve from the prior month.
Despite the clear loss of momentum, not only in Australia’s most populous states but other parts of the country including Queensland, Zammit is not concerned by recent developments.
The level of activity remains fairly solid,” says Zammit. “NSW and Victoria, which comprise around 55% of the economy, remain above their trend rates of growth.”
While he admits that the economic outlook for Queensland “remains uncertain”, having fallen below its historic average growth rate in March, he believes recent developments, including around interest rates, will likely help to underpin activity levels across the nation moving forward.
Fitting with the findings of the ANZ survey, the separate Westpac-MI leading index for April — an indicator on the likely pace of economic activity three to nine months into the future — continues to suggest Australian economic growth will remain below its historic trend in the second half of the year.
Like ANZ’s Stateometer, the Westpac survey uses economic data releases from Australia and abroad, along with other indicators of growth such as movements in stock markets, to evaluate where economic growth is likely to head in the months ahead.
“The six month annualised growth rate in the Westpac-Melbourne Institute Leading Index rose from –1.51% in March to –1.08% in April,” said Bill Evans, Westpac’s chief economist.
“The index has now been in negative territory for the last 12 months and continues to point to below trend growth in the economy throughout 2016. With trend growth generally assessed as 2.75% for Australia the index is sending a more negative signal than both Westpac and official forecasts.”
Australia’s official March quarter GDP report will be released by the ABS on June 1. While it will provide a backward looking picture on where the economy has been rather than where it is heading, based on the ANZ and Westpac surveys, it appears that momentum in the economy has already started to turn lower.