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State of the states

By Saul Eslake - posted Tuesday, 30 May 2006

There’s no doubt that the transition from residential property market boom to resources boom is altering the distribution of economic activity across Australia.

It is heightening talk about jobs, business and wealth moving from Australia's south-east, where the majority of the population lives, to the north and west, where the majority of the resources are located.

This picture of a two-track Australia has substance to it, but the reality is more nuanced than the assertion that Western Australia and Queensland are gaining at the expense of Victoria and NSW.


WA is doing spectacularly well. After recession in 2000-01 (for the first time in 19 years), WA's economy has grown at an average annual rate of over 5 per cent and, according to the forecasts underpinning this year's state budget, will grow by an average of 4 per cent per annum over the next four years. Within the next two years West Australians will have moved ahead of residents of NSW and Victoria to have the highest average per capita household disposable incomes of any part of the country except the ACT.

WA's unemployment rate is down to 4 per cent and is projected to remain below 5 per cent for the rest of this decade.

Perth's housing market is booming, with average prices almost doubling over the past four years. Not surprisingly, the WA Government is in a very strong financial position, having become a net creditor two years ago and expecting a huge budget surplus this financial year, even though its operating expenses have risen by over 10 per cent per annum during the past two years.

Queensland is also doing well, with economic growth averaging 5 per cent per annum over the past four years and expected to continue at close to 4 per cent per annum over the remainder of the decade.

Queensland has generated nearly one-third of all of the new jobs created in Australia over the past two years, despite having less than one-fifth of the population; and its unemployment rate, traditionally above the national average, is now just below it at 5 per cent.

When Queensland's rapid population growth is taken into account, its economic performance is distinctly less impressive than WA's. Per head of population, its economy has grown by a full percentage point per annum less than that of WA.


Average household incomes remain the second lowest in the nation, because Queensland is a low-productivity economy, with output per hour worked 13 per cent below the national average.

Queensland's mining industries are benefiting from high commodity prices, but its rural and tourism sectors are being hurt by the strong dollar.

The Northern Territory's economy has been weak for much of the decade, with growth averaging less than 1 per cent per annum between 2001-02 and 2003-04 and unemployment averaging nearly 6 per cent. But activity is starting to pick up, with economic growth expected to average 7 per cent this financial year and 6 per cent in 2006-07. House prices in Darwin are rising almost as fast as in Perth.

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First published in The Age on May 27, 2006. The complete article can be found here (pdf file 88KB).

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About the Author

Saul Eslake is a Vice-Chancellor’s Fellow at the University of Tasmania.

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