NSW’s economy grew by 3.7 per cent in FY23, and NSW Treasury expects growth to moderate to 1.5 per cent in FY24. Higher housing costs faced by households in NSW, which are far higher than the rest of the country, combined with high inflation and tax bracket creep have weighed on household consumption. Public demand is continuing to support the economy and growth is being boosted by high international migration. NSW Treasury expects growth to average 2.1 per cent per annum over the four years to FY28, below its long-run average growth rate of 2.4 per cent.
Victoria’s economy increased by 2.6 per cent in FY23 and the Department of Treasury and Finance is forecasting growth of 2.0 per cent in FY24, despite strong population growth. The effects on the economy from the COVID-19 lockdowns are still being felt. Victoria has the highest unemployment rate of the states, at 4.5 per cent in June. Residential dwelling price growth has been the weakest of the nation, recording growth of 13 per cent since February 2020, compared to Western Australia with the strongest growth of 70 per cent over the same period. Victoria expects economic growth will rise by 2.5 per cent in FY25 and average 2.7 per cent per annum over the four years to FY28, broadly in line with its long-run average growth rate of 2.6 per cent.
Queensland’s economy increased by 2.3 per cent in FY23 and Queensland Treasury forecasts strong growth of 3.0 per cent in FY24 due to a significant increase in exports as supply chain issues resolve and continued public investment in infrastructure. Queensland Treasury expects strong growth of 3.0 per cent to continue in FY25, reflecting easing cost-of-living pressures and strong population growth. Growth is forecast by Queensland Treasury to average 2.5 per cent per annum over the four years to FY28, broadly in line with its long-run average growth rate of 2.4 per cent.
Western Australia’s economy grew 3.5 per cent in FY23 and Treasury WA is forecasting growth of 1.8 per cent in FY24. This reflects weak growth in net exports following strength in FY23, with resource producers operating at close to capacity and agricultural exports normalising. This highlights the strong influence of mining, which makes up almost 50 per cent of the Western Australian economy. Very strong population growth is supporting household consumption, while business investment and public demand also remain strong. Treasury WA is projecting continued weak growth in net exports from FY25 onwards due to capacity constraints. Consequently, Treasury WA expects growth to average 2.1 per cent per annum over the four years to FY28, well below its long-run average growth rate of 3.7 per cent.
South Australia’s economy experienced growth of 3.8 per cent in FY23, and the Department of Treasury and Finance expects growth of 1.3 per cent in FY24 due to weak growth in household consumption and business investment. The economy is being supported by strong public demand and dwelling investment. South Australia expects growth to average 1.8 per cent per annum over the four years to FY28, above its long-run average growth rate of 1.4 per cent.
Tasmania’s economy increased 1.1 per cent in FY23, and the Department of Treasury and Finance is forecasting growth of 1.5 per cent in FY24 due to modest household consumption growth. Tasmania’s population growth is the lowest of the country and is expected to remain so over the forecast period, detracting from growth. Tasmania has the lowest unemployment rate of the states, at 3.7 per cent in June 2024, which is likely to provide some support to household consumption going forward. Tasmania expects growth to average 2.3 per cent per annum over the three years to FY27, above its long-run average growth rate of 1.8 per cent.
The Northern Territory recorded a 5.3 per cent fall in economic growth in FY23 due to a decline in net exports. The Department of Treasury and Finance is forecasting growth of 4.9 per cent in FY24, reflecting strong growth in net exports due to increased LNG production capacity more than offsetting weakness in household consumption. Easing cost-of-living pressures are expected to see household consumption recover the following year, with the Northern Territory forecasting economic growth of 2.3 per cent in FY25. Growth of 7.1 per cent is forecast for FY26 due to strong growth in net exports, with growth projections of 4.1 per cent in FY27 and 2.1 per cent in FY28. The Northern Territory expects growth to average 3.9 per cent per annum over the four years to FY28, well above its long-run average growth rate of 2.0 per cent.
ACT’s economy grew by 4.3 per cent in FY23, with ACT Treasury forecasting growth of 3.0 per cent in FY24 and 2.8 per cent in FY25. Growth is projected to increase over the forward estimates, reaching 3.8 per cent by FY28, as cost-of-living pressures ease and household spending increases. ACT Treasury expects growth to average 3.3 per cent per annum over the four years to FY28, below its long-run average growth rate of 3.5 per cent.
For all states and territories, the outlook for economic growth is highly uncertain. With inflation remaining stubbornly high and continued tightness in the labour market, interest rates are likely to remain at elevated levels for some time, weighing on activity.
Increased geopolitical instability means states which are highly dependent on commodity exports, particularly Western Australia, Northern Territory and Queensland, have heightened risk. Australian commodity exports are heavily dependent on the level of growth in China and there is significant risk around a rise in trade tensions, which could negatively affect growth.