An uptick in sea and tree changers heading north has led to Queensland being ranked the best-performing state economy for the first time in the 13-year history of CommSec’s State of the States report.
The quarterly report, which ranks states and territories on their economic performance, cited Queensland’s “strong relative and absolute population growth, a solid job market and buoyant overseas demand for energy resources, such as coal and natural gas” as reasons for its impressive showing.
The report measures performance across eight indicators including: economic growth; retail spending; equipment investment; unemployment, construction work done; population growth; housing finance and dwelling commencements.
Tasmania dropped from first to second position in the latest report.
South Australia has lifted from fifth place to third.
NSW is now in joint fourth spot with Victoria, ahead of the ACT (sixth), Western Australia (seventh) and the Northern Territory (eighth).
CommSec Chief Economist Craig James said that Queensland’s tourism-focused economy had previously prevented it from reaching the top spot, but added that this had changed in recent times.
“The diversification of its economy has traditionally prevented Queensland from taking top spot in the economic rankings,” he said.
“That is, strength in some sections of the economy had been offset by weaknesses in others.”
That had now changed, with the economy recording growth across a diverse range of metrics.
“But Queensland is currently supported by solid mining, energy and tourism sectors as well as solid internal migration,” Mr James said.
“Queensland has a strong report card, ranking first on relative population growth and relative unemployment, and is second ranked on three of the other eight economic indicators.”
In fact, the state was now outperforming the national average on five indicators, Mr James said.
“When looking at annual growth rates to get a guide on economic momentum, Queensland had annual rates that exceeded the national average on five of the eight indicators,” he said.
Population boom puts pressure on housing
PRD chief economist Dr Diaswati Mardiasmo said that Queensland had witnessed a boom in inbound migration during the pandemic.
This was partially due to the uptake of remote working patterns, which allowed people to move further away from their place of employment.
But it was also due to Queensland’s relatively low cost of housing, which had attracted migration from expensive markets like NSW and Victoria.
“[There are] more affordable properties, in terms of bang for buck, compared to NSW and Victoria,” she said.
“This attracted a lot of interstate investors.”
She added that a lack of lockdowns relative to NSW and Victoria may have also encouraged people to make the move to Queensland.
The influx of out-of-state arrivals has put pressure on the Queensland housing market, with the state recording the biggest quarterly rent increase in nearly 20 years in 2022, according to the Real Estate Institute of Australia.
In response to the escalating housing crisis in the state, the Queensland government convened a Housing Summit in October.
A $1 billion boost to the Housing Investment Fund was announced at the Summit.
Dr Mardiasmo said that the influx of new residents to the state had caught the government off guard.
“… there was a lag of supply – we weren’t prepared for the sudden increase in demand,” she said.
“Especially as under construction and/or planned projects were challenged by labour and construction material factors – so many projects were stalled.
“The government was not prepared for it either, so they didn’t have a ready-to-go responsive strategy or already planned strategy that could be deployed – for example to create or make more residential or mixed-use land available for building supply.”
While rising interest rates had taken some heat out of the market in 2022, demand was still outpacing supply, she said.
“Further, we now have a rental supply issue, wherein rents have gone up, and with a lower price than NSW and VIC, we are still attracting considerable interstate investment,” she said.
Whether that situation would continue in 2023 was largely dependent on how high interest rates went, she said.
Mr James agreed that what happens next in the housing market would likely have an impact on the economic performance of all states and territories.
“In terms of future economic performance for all state and territory economies, much will depend on the performance of housing and job markets at a time of higher interest rates,” he said.