Victoria and New South Wales have topped Commonwealth Bank’s state economy rankings, but a look at how much individual citizens benefit from that strength reveals a very different story.
The State of the States report released on Monday by Commonwealth Bank stockbrokerage arm CommSec found Victoria and New South Wales boasted the country’s strongest two economies, with resource states such as Western Australia and the Northern Territory lagging badly behind.
However, the economic indicators used by CommSec to assess each state say more about the environment for businesses than individuals, according to the Grattan Institute.
Speaking to The New Daily, Grattan Institute Australian perspectives fellow Brendan Coates said the CommSec report overlooked the data most important to individual residents of each state – gross state income per capita.
Mr Coates’ comments came following the release of Grattan Institute’s State Orange Book, a report assessing states’ policy agendas and their relative success which was also released yesterday.
Surprisingly, this report found that on a gross state income (GSI) per capita basis, Victoria and NSW were ranked in the middle to bottom-half of the pack.
“The big difference between this [Grattan report] and the CommSec report, which says the Victorian economy is flying, is that we’re focusing on incomes per person, because that’s really what determines how well people are doing,” Mr Coates said.
“Victoria has had such rapid population growth that it’s having the effect of boosting the GSP numbers [a measure of total state wealth], which is great if you’re in business because you have a larger pool of potential customers, but it’s not doing a great deal to boost incomes per resident.”
Resource states lead the pack
The Northern Territory and WA took out the number one and two spots respectively when ranked on income per capita.
Incomes in WA are currently 11 per cent higher than they were a decade ago, giving the state one of the highest rates of income growth in the country despite incomes there “going backwards in the past five years”, Mr Coates said.
Meanwhile, incomes in Victoria have remained relatively flat over the same 10-year period, despite the uptick in gross state product (GSP).
“Victoria has had such rapid population growth that it’s having the effect of boosting the GSP numbers, which is great if you’re in business because you have a larger pool of potential customers, but it’s not doing a great deal to boost incomes per resident.”
Mr Coates put the income growth in Western Australia and the Northern Territory down to the mining boom that bolstered the states’ economies earlier in the decade.
‘Ebb and flow’ of economic success
The CommSec report found that Western Australia and the Northern Territory had both slipped further behind other states in the past quarter, but evidence of growth is starting to appear.
CommSec senior analyst Ryan Felsman told The New Daily that WA has the second-highest skilled job vacancies and that “green shoots” of growth are starting to appear in the mining industry again.
“The critical thing to remember is that state economies ebb and flow; WA used to be a leader,” he said.
Data from past CommSec State of the States reports shows Western Australia repeatedly topped the list of states up until around 2014, meanwhile Victoria rapidly climbed from fifth position to claim the top spot earlier this year.
However, Mr Felsman said it’s important for WA to “diversify away” from resources to strengthen its economy, suggesting that tourism and higher education could both help boost the state’s position.