The three things putting the brakes on the NSW economy

SEPTEMBER 14 2016 – 4:20PM

Matt Wade

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It’s been Australia’s growth powerhouse since the end of the mining boom but there are signs the NSW economy is losing momentum.

While the state economy is still performing above its long-term trend, the ANZ’s monthly “Stateometer” shows NSW has fallen back from the thirteen-year highs reached late last year.

The Stateomenter index, which measures the performance of state and territory economies, said there has been a “broad slowdown in the underlying indicators” in NSW and that growth may soon return to its long-term trend rate.

“For quite a while NSW has been the stand-out in terms of economic performance,” said ANZ economist, Kieran Davies. “It was growing well above trend rate for some time but we have seen a change. Growth has slowed quite sharply this year.”

The NSW economy has been leading the nation, but economists are wondering if it is about to slip back to the pack.
The NSW economy has been leading the nation, but economists are wondering if it is about to slip back to the pack. Photo: iStock

ANZ’s Stateometer draws on 37 economic indicators covering business activity, household activity, the jobs market, the housing market and trade.

Mr Kieran said there has been a noticeable slowdown in three NSW indicators – the jobs market, the housing market and business activity. Indicators on the household sector and trade remained where they were in December 2015 when the NSW Stateomenter result reached its highest point since 2002.

“You can’t maintain that very strong rate of growth indefinitely,” Mr Davies said.

“It’s not surprising for growth to come back to trend at some point.”

An extended period of low interest rates and a drop in the value of the dollar following the mining boom have underpinned a sustained period of strength for the NSW economy. A separate gauge of regional economic performance, CommSec’s “State of the States” report, shows NSW has been Australia’s best performing state economy since 2014.

State Treasurer, Gladys Berejiklian, said the ANZ Stateometer was “another positive assessment of the NSW economy” that showed economic growth in NSW has “remained above trend.”

Official growth figures released last week showed NSW State Final Demand – a broad measure of spending – grew by 3.7 per cent in 2015-16. That was the strongest of the states and about three times the national growth rate. The Westpac-Melbourne Institute Survey of Consumer Sentiment, released on Wednesday showed consumer sentiment registered a solid rise in NSW this month to be well above the national average.

But there have been some weaker signals, including National Australia Bank’s monthly business survey, released on Tuesday, which showed a decline in NSW business conditions in August.

The ANZ Stateometer showed Victoria’s economic growth was above trend and accelerating, with the main driver a buoyant jobs market. But the minerals-rich states of Queensland and Western Australia continue to lag in the wake of the mining downturn. The report said the WA economy remains “very weak” and that Queensland’s growth rate is “well below trend.”

The Northern Territory economy is also below-trend rate but momentum has improved over the few past months. Tasmania and South Australia are both growing at rates close to their long term trends.  Growth in the Australian Capital Territory has accelerated and it is now well above trend.

 

Source : The Sydney Morning Herald

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