The Australian Capital Territory economy is powering ahead, accelerating at a faster pace than other states and territories.
According to the ANZ’s stateometer measuring economic performance across Australia’s states and territories, economic activity in the ACT is growing at an above trend rate.
Indeed, it accelerated sharply in August and reached its highest level since 2007.
According to the ANZ economics team, the key contributor to the ACT’s growth lies in the strength of the labour market.
“The index is very volatile, but the underlying data continue to suggest that the Stateometer will remain positive in September,’’ the ANZ said.
This is in stark contrast with the rest of Australia.
NSW, which has long been engine room of the Australian economy, has slipped back to trend growth.
Moderating property prices, slippage in business conditions and low growth in the labour market has seen the NSW index falling throughout 2016 and turning slightly negative in August. The ANZ says NSW will grow at an about trend pace but there’s now a risk of it falling further.
Similarly, Victoria is growing at an above trend pace but housing is starting to weaken.
Queensland’s index has been decelerating over the past few months and was more negative in August.
South Australia is moving at trend growth with an improving labour market offsetting a weakening housing sector.
Western Australia hit hard by the mining downturn has now reached a seven year low and weakness in the labour market and housing sector dragged Tasmania’s growth.
The Northern Territory is edging up after reaching a five year low in March and April.
So what’s making the ACT economy so strong? What’s the secret?
According to a Deloitte Access Economics report released this week, it’s the gridlock in the Senate.
“As we’ve regularly pointed out in our discussions of the ACT economy, gridlock on Capital Hill has allowed Canberra’s economy to continue to mosey along,” the Deloitte Access Economics quarterly Business Outlook report says.
“Freed of the anchor and chain of public service cuts (yes, they were real, but they weren’t huge, and they’ve essentially run their course), ACT job and population growth have recovered, and the unemployment rate has dropped – meaning that the ACT is once again boasting of the lowest unemployment rate in the nation.
“And the ACT economy has also been a happy and continuing beneficiary of low [and still falling] interest rates.”
According to Deloitte, the ACT is unusual because what happens in Government has an impact on the local economy.
“The inability of Australian federal politicians to agree on, well, anything has been a handy positive for the ACT economy,” the report says.
“The earlier rounds of public service cutbacks have run their course and, despite an excellent case for further federal budget repair, nothing looks like happening any time soon. Our usual caveat remains operative.”
Still, gridlock can’t go on forever. And that could create issues for the ACT economy down the track.
“At some stage someone will be both in government and in office and – whichever side of politics that may be – chances are it will pose challenges for the ACT,’’ says Deloitte.