The National Australia Bank has started providing a handy state by state economic update.
The bank says this will become a regular quarterly publication summarising developments in the state economies and providing forecasts of state production and unemployment by state.
It will go well with the bank’s monthly and quarterly business surveys.
The September survey is out next week.
The bank says that in the June Quarter 2009, the NAB Quarterly Business Survey reported a convergence in business conditions (in the last three months) across states, with readings appearing to consolidate after having plunged since December 2007.
So far, conditions in WA have deteriorated the most (with little sign of recovery), while SA and Queensland have experienced the next largest declines.
Although the contraction in conditions has not been as substantial for NSW and Victoria, this partly reflects more moderate activity in these regions prior to the crisis.
Although conditions in Japan and the US have deteriorated significantly, Australia’s major trading partners in non-Japan Asia have recovered more robustly than expected.
This has led to an increase in real exports in NSW, Queensland and WA.
While export growth in the mining states is currently weak in comparison with recent years, China’s continued appetite for raw materials and the fact that much of the high-cost mining in the region has been abandoned (due to lower commodity prices) has supported exports.
Combined with evidence that real imports into all states other than WA have declined in the past year, this has resulted in net export growth across the states picking up over the year to June 2009.
The economic downturn has affected state revenues, especially through those channels that are more sensitive to cyclical fluctuations.
Conveyancing duties, which currently comprise around 10% of state revenue, have fallen with the moderation in the number and value of property transactions.
Looking forward, the potential for a period of tepid growth in commercial property values in WA and Queensland could further weigh on duties.
Also in these regions, mining royalties to the state government have declined, with falls in commodity prices and the appreciation of the Australian dollar against the greenback affecting export revenue.
In addition to these factors across all states, GST-backed grants from the Commonwealth have been impacted by the slowing in consumer spending.
Over the 2009-10 financial year, the value of GST transfers, which comprise around one quarter of state government revenue, are expected to remain relatively flat.
Yesterday’s jobs figures from the Australian Bureau of Statistics showed some interesting changes in state employment.
The jobless rate in Victoria dropped to 5.6% in September from 6.2% the previous month and in NSW it fell to 5.6% from 6.1%.
In South Australia the rate declined to 5.7% from 5.8% and in the ACT it eased to 3.5% from 3.6%.
In the Northern Territory it was unchanged at 4.2% for a third straight month.
However, in Queensland the unemployment rate jumped to 6.3% from 5.5%; Tasmania’s rose to 5.5% from 5.1% and in Western Australia it was 5.8% up from 5.4%.
NSW
The exposure of the NSW economy to the finance sector has significantly affected economic conditions since mid-2008.
Consistent with a decline in State Final Demand (SFD), published growth for NSW Gross State Product (GSP) is expected to fall below 1 per cent over FY2008/09.
Looking forward, while conditions are expected to improve, high unemployment is likely to weigh on the recovery, with GSP growth forecast to remain below trend in FY2009/10.
Victoria
While growth remains weak in Victoria, investment activity has held up better than in most other states with continued spending on office and retail developments.
Similar to NSW, economic growth is likely to remain muted over FY2009/10 as the rise in unemployment over recent months weighs on consumer confidence and prolongs the process of household de-leveraging.
Queensland
SFD in Queensland has slumped over 2009, owing to both weak private consumption expenditure and investment.
The slowdown in activity has led to a significant decline in capacity utilisation, although relatively strong wage growth has precluded headline inflation from moderating as much as in other states.
The weakening in activity and a rapid decline in business confidence mean sub 1 per cent growth in GSP is likely over both FY2008/09 and FY2009/10.
Over the recent episode the pace of Brisbane house price growth has slowed significantly, although weak dwelling construction (relative to population) is likely to limit the size of further falls in residential property prices.
SA
Conditions in SA have remained solid relative to other states, owing to limited exposure to those industries most affected by the financial crisis.
As such, the labour market in SA has weathered the recent downturn comparatively well, reflected by strong private consumption expenditure and a NAB Quarterly Business Conditions Index that is currently at the highest level of any of the states.
Over the next year we expect conditions in SA to continue improving, with GSP rising by 2.2 per cent over FY2009/10.
WA
The significant decline in asset values in WA has been a drag on economic activity, with the state experiencing relatively weak business conditions and only limited signs of recovery.
While labour unemployment in WA remains relatively low, it has risen the most of any region since the onset of the financial crisis.
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