Stateometer: cooling down

Cherelle Murphy & Jack Chambers

Senior Economist & Market Economist, ANZ

Australia’s economy lost some of the momentum built during the summer months in the second quarter, according to the latest ANZ Stateometer.

The four largest states– representing nearly 90% of Australia’s GDP – decelerated, slipping below their trend growth rates.

"Trade was positive and with increased momentum across most of the country”

As ANZ Research highlighted last quarter, the weighty housing sector has had a strong influence on these data.

Trade was positive and with increased momentum across most of the country. Households have also been affected with weaker household (or consumption) subindices through the quarter. Tasmania was the positive exception in both the consumer and housing sectors.

Although labour markets maintained above-trend growth, they slipped from the eight year high recorded in the March quarter.

Trade was positive and with increased momentum across all geographies except Tasmania and the NT. Queensland and South Australia maintained a steady, above trend, trade sector in the June quarter.

Some downside risks have become more acute - trade tensions stemming from the US; leadership ructions in domestic politics, Australian households are - on average - more vulnerable to changes in housing market sentiment due to rising indebtedness; and some of our regional communities through the south, northern and eastern states are suffering from the drought, which worsened over the June quarter.

Stay positive

Despite all this, investment spending remains good; interest rates are low; profit growth is solid and the Australian dollar has depreciated further.

Public spending growth also remains solid. There are also upside risks from higher commodity prices, which could be more stimulatory for the economy than we currently expect.

The loss of momentum indicated by the ANZ Stateometer in the June quarter does not signal a change of economic direction for any of our states or territories. The NT though may experience further slowing as it adjusts from the very high levels of activity associated with the Ichthys LNG plant.

ANZ Research expects the unemployment rate to continue to move lower in all states and territories over the coming 12 months and inflation to gradually rise.

The ANZ Stateometer is a set of composite indices which measure economic performance across Australia’s states and territories.

The index for each jurisdiction extracts the common trend across 37 economic indicators using principal components analysis. The economic indicators are all monthly data series and cover business and household activity, the labour market, the housing market and trade.

Developments across this diverse country are rarely uniform and we hope these geographically specific indices help you to see through the haze of state by state data and more intuitively piece together the state of the national economy.

Cherelle Murphy is a Senior Economist & Jack Chambers is an Economist at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.