Sydney's expensive housing market may be helping to boost economic activity in other parts of Australia

@StephenSmiley/ TwitterSydneysiders are leaving.
  • It looks like Australian economic growth improved in early 2018, according to economic data analysed by ANZ Bank.
  • It found high home prices in New South Wales may be encouraging residents to move to other parts of Australia, helping to boost economic activity in those regions.
  • Australia’s Q1 2018 GDP report will be released in early June.

It looks like Australian economic growth improved in early 2018, led by continued strength in the eastern states.

However, Australia’s largest state economy, New South Wales, appears to be slowing on the back of weakening housing market conditions.

That’s the mixed news to come from ANZ Bank’s latest “Stateometer” with most state and territory economies seeing activity levels pick up in the March quarter compared to the levels seen late last year.

The Stateometer is a visual indicator that uses trends across 37 individual economic indicators to measure the performance of Australia’s states and territories over a particular quarter.

Think of it as a report card on how each state and territory economy performed compared to its historic average.

Here’s the latest snapshot.

ANZ Bank

For clarity purposes, any state and territory in the top half of the chart is deemed to be growing at an annual pace above its historic trend, while those in the bottom half are growing at below trend.

On the bottom axis, anything on the left suggests that economic activity is slowing, while anything on the right indicates it’s accelerating.

Based off the economic indicators received in the March quarter, the news was mostly good.

Not only did the data suggest the broader Australian economy grew slightly above its perceived trend level, widely regarded as around 2.75% per annum, but so did most individual state and territories.

The December quarter Stateometer presented a similar view. However, year-on-year GDP growth slowed to 2.4%, partially in response to a large drag from trade which was temporarily impacted by weather disruptions. Without a 0.4 percentage point drag from export volumes, growth would have been at 2.8%.

However, while New South Wales continued to grow at an above-trend pace, the data indicates that momentum in the state is slowing.

“Activity in New South Wales slowed to just above its long term average in the first quarter,” said Cherelle Murphy and Jack Chambers, Economists at ANZ.

“Housing was the main drag, falling to its lowest in almost six years.

“Household and business activity were also negative influences.”

However, while momentum in New South Wales slowed, it improved in all of its state neighbours — Victoria, the ACT, Queensland and South Australia.

Murphy and Chambers said this could be due to high house prices in New South Wales, especially in its capital, Sydney.

“New entrants from overseas continue to boost all state and territory populations, but New South Wales’ net interstate migratory losses have worsened,” they said.

“It is likely that very high house prices have tempted some New South Welsh elsewhere.

“In Victoria, ACT, Queensland and Tasmania, where house prices are relatively lower, net interstate migration has remained positive.”

For those states more aligned to the mining sector, Western Australia and the Northern Territory, the Stateometer suggests they continued to underperform the national average, undermined, in part, by weak population growth.

“Western Australia’s economy slipped in the March quarter, with the state in the bottom left quadrant of the ANZ Stateometer,” said Murphy and Chambers.

“That indicates an economy that is growing below trend and decelerating. Its population growth rate has slowed dramatically over the past five years and house prices have been edging lower for three.

“The Northern Territory also grew at a below trend rate but has accelerated relative to the end of 2017. Falling house prices in Darwin have also accompanied slower population growth.”

Looking ahead, the pair said they are watching house prices closely given their flow-on effects to the remainder of the economy are extensive.

“House prices impact household balance sheets, household spending, saving decisions, investor’s appetite for purchasing and the construction of dwellings,” they said.

Australia’s Q1 2018 GDP report will be released on Wednesday, June 6.

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