Key points

• Economic activity is shifting back to the eastern seaboard as the economy transitions towards non-mining sources of growth.

• Domestic demand will be strongest in New South Wales and Victoria, the states experiencing the fastest growth in residential property prices and construction and which have the most diversified industrial bases.

• This will not be enough to drive a nationwide acceleration in domestic demand. In Western Australia, Queensland and the Northern Territory, weak commodity prices will weigh on investment, government revenue and the labour market. Resource exports (particularly LNG) will be surging in these states however, adding substantively to national export growth.

• The lower AUD is benefiting export-oriented and import-competing firms across all states. This is particularly apparent across services sectors, including tourism expenditure and international student enrollments. While downside risks emanating from the global economy are pronounced, more Australians are also choosing to travel domestically, and the lower AUD will help redirect retail sales onshore. This could explain some of the recent improvement in the Tasmanian labour market, as well as some pockets of the Queensland economy.

• The outlook for non-mining business investment is disappointing nationwide. This partly reflects a shift towards services sectors, which by their very nature are more labour intensive (rather than capital intensive). In addition, cautious attitudes towards investment are a constraint, with high hurdle rates demanded for new investment decisions. Confidence in the commercial property sector meanwhile is improving in NSW, Vic and Qld although the level of approvals is low. Infrastructure spending will provide some offset to lower mining investment, but is mainly concentrated in NSW.

• Forecasts for all states and territories are dependent on further gradual improvement in consumer spending. While the wealth effect will provide some support in NSW and Victoria, high household debt levels, particularly in NSW, suggest some downside risks in the medium term as interest rates begin to rise. Weak household income growth is also reason for caution, having not kept pace with strengthening consumption in some states (including Tasmania and Victoria). Recent equity market wobbles could see another step-up in consumer caution.

• A snapshot of the outlook for each individual state and territory is available in the Overview. Links to individual handbooks for each state and territory are below.

Overview:

• NAB State Economic Handbook: September 2015 (PDF, 226KB)

 Individual State Reports:

• New South Wales (PDF, 790KB)
• Victoria (PDF, 646KB)
• Queensland (PDF, 853KB)
• South Australia (PDF, 2MB)
• Western Australia (PDF, 647KB)
• Tasmania (PDF, 670KB)
• Australian Capital Territory (PDF, 669KB)
• Northern Territory (PDF, 497KB)