Western Australia has once again emerged as the best-performing economy according to the latest CommSec State of the States report for January 2025, holding its position firm for the second quarter consecutively. The report evaluates economic performances across Australia based on eight key indicators, with Western Australia leading the way, and both South Australia and Queensland following closely behind, sharing the second spot.
CommSec’s comprehensive analysis highlighted Western Australia’s superior performance across significant economic metrics such as retail spending, unemployment rates, and housing finance. Its remarkable figures are attributed to the enduring demand for resources, especially iron ore and natural gas, which have seen improved prices due to international stimuli. CommSec chief economist Ryan Felsman noted, "Overall, economies have slowed in response to higher interest rates and inflation; how they fare moving forward will be influenced by the job market's resilience and interest rate trajectories."
Queensland, which has climbed from third place, also recorded solid outcomes and joins South Australia, which maintained strong economic growth. South Australia has excelled particularly with its real economic growth at 8.4% above the decade average, marking it as the fastest-growing economy on this metric. Treasurer Stephen Mullighan expressed satisfaction, stating, "It’s pleasing to see our state’s economy maintain second position on the leader table, especially considering the closely fought contest this year."
The rankings revealed notable contrasts across Australia’s economic landscapes. Victoria continued its steady performances, holding fourth place due to leading scores on construction work completed, but it lagged behind more resource-dependent states like WA and Queensland. Tasmania remains stable at fifth but has been hindered by the lowest population growth rate of any state, posing risks to its long-term economic viability.
Meanwhile, the Australian Capital Territory (ACT) has struggled drastically, falling to second-last place due to poor results across housing and construction metrics. With new dwelling starts significantly down nearly 50% compared to the decade average, the territory is rife with slow construction timelines. Felsman pointed out, "Combined, these factors have resulted in the ACT's disappointing performance within the latest report. Homes are not being built fast enough, driving potential homeowners to reconsider their options. If this trend persists, it could weigh down overall growth considerably."
While Western Australia and Queensland thrive on resource wealth, the report indicates different pressures on the southeastern states like New South Wales (NSW) and Victoria, with all three grappling with the economic burdens of high interest rates. The predictions for future growth across states hinge on key interest rates, with potential cuts anticipated by the Reserve Bank of Australia (RBA) around February 18. If rates decrease, consumer spending could see revitalization due to a reduction in borrowing costs.
The state rankings within the report underscored the stark performance disparities. Western Australia ranked first across retail spending and population growth, capturing the lion's share of positive economic trends. Queensland’s upward movement also emphasizes the need for stronger supply chains and housing markets to sustain momentum. On the other hand, South Australia’s construction work addition indicates notable potential for growth as housing demands rise.
With Tasmania receiving criticism for economic stagnation, Labor Treasury spokesman Josie Willie indicated, "Tasmania is now bottom of the leaderboard on annual growth rates of the eight economic indicators; the reality is harsh and direct about the state’s economic performance. Alarmingly, Tasmania holds the distinct challenge of showing negative employment growth. We must act to rejuvenate our economic framework before we fasten ourselves to these patterns of dependence on broader national performance."
Overall, the January 2025 CommSec report delivers somber warnings and hopeful forecasts simultaneously. The future hinges on strategic policy adjustments as Australians face unyielding economic headwinds from higher interest rates, yet the resilience demonstrated by states like Western Australia and Queensland paints stories of hope among the challenges. Moving forward, the anticipated RBA decision on interest rates may prove decisive for consumer confidence and potential economic recovery across all states.