The Spring 2017 edition of the NSW Economic Update presents a current snapshot of the NSW economy and provides relevant points of comparison with other Australian States and Territories.
For the seventh consecutive quarter, New South Wales has been the best performing State in Australia. Commsec’s October 2017 State of the States Report found that NSW retained its top ranking on retail trade, and dwelling starts, and is now top on equipment investment and unemployment. In fact, the lowest ranking for the state—housing finance—is third after the ACT and Victoria.
2016 saw record levels of residential dwelling approvals in NSW, which have subsequently created a construction boom in the State. However, as of June 2017, the average monthly number of dwellings approved in NSW had fallen to 5,755 approvals: a 14.4% drop compared to 12 months earlier. According to the Reserve Bank of Australia, this reflects a number of factors, including reduced demand for off-the-plan apartments and developers experiencing tightening access to bank finance.
The fall in approvals will eventually lead to a fall in dwelling construction: observers note that there are emerging signs that a peak in housing construction may soon arrive, with the consequence that residential construction will likely have less of an impact on economic growth than experienced in recent years. However, the good news is that this slowdown is likely to be gradual and reasonably shallow, especially in NSW. According to the Commonwealth Bank, this is for several reasons:
- While the jobs downturn will be largest in NSW and other eastern States, high population growth and a strong labour market will minimise disruption;
- NSW has seen a lift in non-residential building approvals, which may provide a partial offset to some of the jobs losses in residential construction; and
- There remains a large pipeline of infrastructure spending still to come which should also add to jobs growth, especially construction.