ANZ Stateometer: holding

Economic momentum across Australia’s states and territories held firm in the September quarter, the ANZ Stateometer found, helped in part by the COVID-19-hit in the previous corresponding period.

The result should be viewed in the context of the weakness seen in the third quarter 2021, when Delta restrictions across large parts of the country stalled key parts of the economy. Even still, resilience is evident within regions largely unaffected by restrictions.

According to the ANZ Stateometer, economic momentum remained above trend in all states and territories in the three months to September 30, accelerating across all except the Northern Territory.

It’s clear Australia’s economy is standing tall despite a cocktail of high inflation and rising interest rates.

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Strength

The consumer, labour and trade subcomponents of the ANZ Stateometer index were strong across most regions.

Labour underutilisation continues to fall and job vacancies remain close to record highs. Households have not pulled back on spending and businesses are still struggling to meet demand.

On the other hand, the housing sector is cooling. Rising interest rates are feeding into falls in housing lending and prices, which have led to a decline in the housing component. Building approvals have also unwound.

That said, household savings buffers are very strong, delaying any debt-servicing crunch.

The Reserve Bank of Australia’s road ahead will be data dependent. ANZ Research expects the RBA to lift the target cash rate to a peak of 3.85 per cent by mid-2023. That translates to a further 100 basis points of hikes by May.

Sharp

The ANZ Stateometer index is based on an annual comparison of indicators, meaning the New South Wales and Australian Capital Territory performance in the September quarter of 2022 is compared with the very weak base in 2021 during lockdowns. Both regions showed a sharp rise.

Victoria’s economic performance accelerated further above trend during the period but was also somewhat inflated by lockdowns. Queensland’s momentum accelerated, driven mainly by a jump in the consumer and trade components.

South Australia’s performance improved a touch in the quarter, with jumps in the consumer and trade sectors offsetting decreases in the housing and labour sectors. Western Australia’s performance accelerated further above trend.

In Tasmania, the economic performance was practically unchanged in the three months to end September, with three of the state’s five components accelerating. The NT’s economic performance slowed a smidge, in the only region where economic activity decelerated in the period.

Bansi Madhavani, & Adelaide Timbrell are Senior Economists, Madeline Dunk is an Economist and Arindam Chakraborty is a Junior Economist at ANZ

This story is an edited excerpt from the ANZ Stateometer, published November 24, 2022