Victoria’s and New South Wales’ poor responses to the coronavirus health crisis have paved the way for smaller states to turbocharge their economic growth.
Commonwealth Bank’s latest quarterly State of the States report reveals Victoria has lost the title of best-performing state economy for the first time in two years.
That honour has instead been claimed by Tasmania, which tied for first place with Victoria in the last report.
It’s the first time since October 2009 that the island state has taken top spot on its own.
CommSec senior economist Ryan Felsman told The New Daily that Tasmania ranked first in four of the eight economic measures used by the bank on a relative basis.
Those measures were unemployment, population growth, retail trade, and business investment, relative to the state’s decade average.
On an annual economic growth basis, the state leads on only one measure: Retail trade.
Laggards gaining pace
Although Victoria fell only one place, and ACT and NSW maintained third and fourth place respectively, Mr Felsman said the gap between the top four and the bottom four is closing.
The success that the bottom four states – Queensland, South Australia, Western Australia and the Northern Territory – have had in containing the virus will likely accelerate that trend, Mr Felsman said.
Although border closures are still in effect in many parts of the country, Mr Felsman said these states and Tasmania will likely see a surge in inter- and intra-state tourism and migration given their safe reputation.
And the transition to remote working will make it easier for Melburnians and Sydneysiders to move to more affordable areas – within their own states and beyond.
“Tasmania could be a beneficiary of that, but also more broadly regional parts of NSW and Victoria, and Queensland always does well with interstate migrants,” Mr Felsman said.
Resource-heavy states steeled against harm
Queensland, WA and NT are also expected to enjoy an economic tailwind from China.
Mr Felsman noted that China’s economy is “rebounding more quickly than the developed world”, thanks to its success in containing the virus.
That will support China’s plan to further develop its infrastructure and industrial sectors – with a knock-on effect for iron ore, natural gas and coal prices.
Since April 1, the price of iron ore has increased 33 per cent to $US110.50 ($155.05) a tonne.
The ongoing demand for resources is good news for Qld, WA and the NT, and for Australia as a whole.
“They’re well placed to insulate the national economy,” Mr Felsman said.
Even so, Mr Felsman said Australia’s economy won’t recover until the coronavirus outbreaks in Melbourne and Sydney are under control and shops and borders can begin to reopen.
“What this report shows is the states with the most success suppressing the virus will get that better balance of health outcomes and economic growth,” he said.