From NAB:
NSW
The outlook for NSW has improved modestly since the last update, partly reflecting positive conditions reported by business services and better consumer spending in response to higher household wealth (driven by rising property prices). NSW is also assisted by the more diverse composition of its economy, meaning that slower mining investment will have a limited impact on the economy, while other sectors (such as tourism) will see the benefits of a lower AUD and interest rates – already apparent in residential construction indicators. Nevertheless, as mining construction slows in the resource-rich states, the potential inflow of interstate migration will see labour market indicators continue to deteriorate. The NSW economy should strengthen as the upswing in housing investment becomes more entrenched and consumer confidence improves on the back of rising property prices. Growth may be above trend in 2013-14, following sluggish growth in recent years.Victoria
The Victorian economy slowed throughout FY13, with softer consumption growth and a contraction in investment expenditure contributing to very modest growth in SFD over the fiscal year. However, the Victorian economy improved slightly in the first half of FY2014, supported by an upturn in consumer spending, which has come about despite further slack emerging in the labour market. Higher household wealth has been a contributing factor, supported by strong improvement in asset prices over 2013. The large level of approvals for apartment projects raises the risk of overbuilding in some locations such as Docklands. Victoria will continue to face headwinds from the structural decline of manufacturing – planned closures in the auto industry are a clear example – although the lower AUD will help other parts of the manufacturing sector. Overall, low interest rates and rising property prices should eventually work to boost household spending, which should see growth in Victoria improve over 2013-14.Queensland
Construction of gas projects in Queensland has helped sustain high levels of business investment in the state, but the impact likely peaked during 2013, while the coal industry continues to face pressures from adequate global supplies in the seaborne market which are keeping prices low – the pipeline of investment projects in Queensland has fallen considerably. Consequently, a slowdown in the pace of business investment growth contributed to softer SFD growth in 2013, although soft labour market conditions and wages growth also weighed on consumer spending. More subdued house price growth relative to the other major eastern capital cities probably contributed to consumers spending behaviour, but given reasonably favourable fundamentals, the Brisbane market is expected to outperform all other capital cities this year, supporting consumer demand in 2014. The outlook for Queensland remains better than the national average, but while the lower AUD will support tourism and domestic consumption, it is unlikely to completely offset headwinds from mining investment and fiscal restraint from 2014/15.Western Australia
A noticeable deceleration in both investment and household consumption has caused WA to be the only state to record a fall in state final product (2.7%) over 2013. Nevertheless, net international exports have picked up strongly, helping to offset some of the weakness from domestic demand, although the unemployment rate has risen to a 10-year high. The Western Australian economy will continue to outperform the rest of the states over the forecast horizon, although growth is expected to be relatively ‘jobless’ as the economy shifts to the export phase of the mining boom, which is significantly less labour intensive.South Australia
South Australian continues to face an economic malaise, although SFD did show signs of improvement in H2 2013 supported by better consumer sales and a reduced drag from business capex. South Australia continues to struggle under the weight of the still elevated AUD, particularly in the non-mining trade-exposed and retail sectors, but this means these sectors will see some relief as the currency depreciates. With one of the weakest labour markets and little capital expenditure currently in the pipeline, economic growth in South Australia is likely to remain subdued through 2013-14 and beyond.Tasmania
Trends in the Tasmanian economy have been somewhat similar to those seen in South Australia. The state has generally underperformed, although there were signs of improvement in late 2013 (lifting to 1.7% over 2013, having declined for much of the past 2 years) as consumer spending rose. Nevertheless, the investment pipeline remains very low, which will limit business investment, which has already been in decline. It is still unclear how the new government’s intention to renegotiate the logging agreement will affect forestry and eco-tourism. Growth will remain soft over coming years.
