Suddenly, everyone’s talking about the Australian economy.
After the release of the latest national accounts — revealing that the economy contracted by 0.5% in the September quarter, the fastest pace seen since the global financial crisis — it’s been thrust into the limelight, especially given only three months earlier the nation was celebrating 25 years of uninterrupted economic growth.
From woah to woe in the space of just three months.
It’s been a stark turnaround in sentiment, leading some to even hypothesise that a recession — defined as two consecutive quarters of negative economic growth — is a possibility.
While few economists believe that will occur, predicting that growth will rebound in the current quarter, there’s now plenty of interest as to how the economy is currently performing.
Enter ANZ with its October “Stateometer” — an index that measures economic performance across Australia’s states and territories — with a potential answer.
It uses trends across 37 economic indicators covering business and household activity, the labour market, the housing market and trade to gauge how each individual state and territory is performing compared to its trend growth rate.
A positive reading indicates economic performance is above trend, while a negative reading indicates that performance is below trend. ANZ says that it is correlated with broader quarterly measures of economic activity, such as state final demand, but is not designed to forecast the figures found within Australia’s GDP report.
Though not as dire as what the Q3 GDP would suggest, ANZ says that “economic activity has moderated over the year to October, with an ongoing divergence across states”.
This divergence can be found in the chart below, supplied by ANZ.
It’s the Stateometer in visual form.
It’s fairly easy to understand. Those states in territories in the top half of the chart are said to be growing at an above trend pace, while those in the bottom half below their historic trend. The bottom axis measures where activity levels are heading, with those in the left-hand side indicating that they are decelerating while those in the right-hand side suggesting that they are improving.
The bold colour is where each state and territory currently sit.
There’s plenty of states — including New South Wales — where economic activity is both running below trend and decelerating, fitting with what many deem to be underlying weakness in the broader Australian economy.
Only Victoria and the ACT are growing at an above trend pace, while the South Australian economy is now growing at a trend pace and improving marginally.
Giulia Lavinia Specchia and Jo Masters, members of ANZ’s economic team
“New South Wales and Victoria, activity continues to expand at around trend pace,” said Giulia Lavinia Specchia and Jo Masters, members of ANZ’s economic team.
“In NSW, growth seems to have stabilised and momentum looks to have improved somewhat, supported by a reacceleration in the housing sector
“Victoria’s economic activity was little changed in October, while momentum continues to be supported by the strength in the labour market.”
They also note that while activity levels in the mining states are still below historic norms, largely to spare capacity in these labour markets, “rising commodity prices and stronger resource export volumes are starting to provide some support for the mining states”.
The biggest mover, say Specchia and Masters, has been in the Tasmanian economy.
“Tasmania’s growth continues to weaken and it has now completely unwound the gains of the past few months,” they say.
It paints a subdued picture about the current state of the economy, suggesting that any rebound in the coming quarters may be tepid in nature.