Tasmania remains Australia's top economic performer, but will this continue after COVID?

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on January 24, 2022 Fact Checked
Tasmania remains Australia's top economic performer, but will this continue after COVID?

Tasmania held the top spot in CommSec's State of the States for the eighth quarter in a row, but 2022 is set to be a 'very interesting year'.

Leading on four of the eight indicators - equipment investment, relative unemployment, retail spending, and dwelling starts - Tasmania continues to lead as the best performing economy in the country.

CommSec's methodology measures eight economic indicators compared with a state's decade average.

Little separated the other states and territories before the Omicron variant emerged according to the report, but following the variant influencing activity across the country, South Australia ranked second overall. 

Victoria came in third, followed by Western Australia, Queensland, New South Wales, the ACT, and the Northern Territory.

CommSec Chief Economist Craig James said Australia's economies are in 'solid shape', well supported by strong fiscal and monetary stimulus.

"Unemployment rates are historically low across much of the nation," Mr James said.

"Labour is in short supply across many industries - a reflection of current COVID-related self-isolation requirements and border restrictions."

While Tasmania held the top position, and is 'likely' to remain on top in the short-term, "much can change over 2022".

"In fact, the Western Australian and South Australian economies have moved up the rankings, performing strongly during the pandemic, with the former benefiting from a surge in iron ore exports and prices, while the latter has benefited from strong government and business investment," Mr James said.

"In differing ways, each state or territory will attempt to ‘live with COVID’ throughout 2022, potentially leading to major changes in the performance rankings."

Queensland set to rise through the ranks, Tasmania to remain on top

Queensland ranked number five this quarter, but some experts have predicted that Queensland's housing boom isn't done yet, which could see the Sunshine State rise through the ranks next quarter.

Chief economist at PRD Diaswati Mardiasmo said that 2022 will see both Tasmania and Queensland's housing markets grow due to three key factors: lower starting prices, housing supply, and rental yields.

"Tasmania and Queensland started off on a lower pricing level compared to NSW and Victoria, therefore there is still room for [prices] to grow," Dr Mardiasmo told Savings.com.au.

"Prices in Tasmania and Queensland are still affordable... which attracts interstate migration and investors."

Dr Mardiasmo said the level of housing supply planned to be built in Tasmania and Queensland is 'much lower' than NSW and Victoria.

"There is still limited new housing supply planned, and yet demand has kept on going and now we are opening international borders," Dr Mardiasmo said.

"Therefore, the imbalance between supply and demand will be felt more in Tasmania and Queensland."

Dr Mardiasmo also said rental yields in Tasmania and Queensland continue to be higher than NSW and Victoria, while vacancy rates continue to be lower.

"Brisbane and Hobart for example have vacancy rates between 1 to 1.5%, whereas Sydney and Melbourne's are 2 to 3%," she said.

"Therefore, rental occupancy is much quicker in Brisbane and Hobart, which means quicker rental income cashflow for investors."


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What will the next State of the States look like?

As for the future, Dr Mardiasmo said there are trends in NSW and Victoria that could potentially 'change the landscape'.

"There is an increasing amount of people coming back to both Sydney and Melbourne as restrictions lift, companies lift work from home flexibilities and request workers to be back in the office, and more jobs become available," Dr Mardiasmo said.

"We will start seeing an increase in [property] sales in these capital cities and also higher absorption of rental properties."

Dr Mardiasmo said that regional economies within these states are 'growing exponentially' due to infrastructure investment and commercial growth.

"Both NSW and Victoria are 'faster' at this than Queensland and Tasmania, which is why you see a metropolitan-like feel in places that would be classified as regional economies," she said.

Dr Mardiasmo also said that with international borders reopening - though each state has its own rules - Australian economies could benefit in a number of ways.

"In general, [new expats will arrive on] working and study visas, [so] places that have a strong international student appeal will see the biggest impact in terms of a shift in housing demand and supply," Dr Mardiasmo said.

"Regional areas that require workers and can tap into the working visa sector will also see the impact.

"Tourism will benefit as a second recipient, given that there are still limitations on tourist visa entry."

Dr Mardiasmo said there are generalisations that can be made about State of the States, but that there is a different mix of demographics, economic structure, and government policies within each state.

She said this creates a "market within market" situation.

"2022 will be a very interesting year - we will see nuances that we may not have seen or predicted, however some will be quite obvious," Dr Mardiasmo said.


Image by David Clode on Unsplash

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Rachel is a Finance Journalist, and joined Savings in 2021. Coming from a background in the FinTech space, her interests include the innovation of lending technology, property, investing, and more. With a passion for educating and informing people about their finances, she hopes to increase the financial literacy of everyday Australians.

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