Start of the shock

Early signs of the COVID-19 economic shock became apparent in the trade channels of Australia’s states and territories toward the end of the March quarter, according to the latest ANZ Stateometer.

The indicator showed trade worsened in all jurisdictions through the period, except in New South Wales and Western Australia.

A uniform downturn in economic activity was not evident, however, with household precautionary buying offsetting weakness elsewhere in NSW, Queensland, WA, the Australian Capital Territory and the Northern Territory.

No Australian household or business started the year expecting a major economic shock, but by March 31 all were managing severe disruption. By April, economic conditions were deteriorating substantially.

As a result, ANZ Research has again cut its gross state product forecasts in all jurisdictions for 2019-20 and 2020-21, in line with its national forecasts.

State governments have been actively supporting their economies, adding to significant federal spending. But the spend is small: close to or less than 1 per cent of each state or territory’s annual gross state product, according to our estimates for the 2019-20 and 2020-21 financial years.

Discretionary fiscal spending has been predominantly targeted at small and medium enterprises, as waivers on payroll tax and government fees and charges. States have also supported households and some industries.

Lockdown

In the three months to the end of March, the ANZ Stateometer showed Queensland, Victoria and SA all grew below trend and decelerated.

Except housing, all the components of Victoria’s Stateometer weakened, resulting in a deceleration of its economic growth rate. Only in Victoria and Tasmania did the consumer component fail to strengthen in March.

Victoria’s lockdown has been one of the most stringent and as a result its economy has showed signs of contracting slightly more than others. Its government estimates a 14 per cent decline in GSP in the June quarter.

Queensland’s economy slipped further below trend in the March quarter. The labour market weakened, as did trade. Housing grew at a below-trend rate but became slightly less negative. The consumer contribution grew at an above trend rate.

Momentum in the SA economy weakened to around a five-year low, with the housing component –which together with trade had been the only positive contributors to the index in the December quarter –falling below trend. The consumer component gained slightly, but remained below trend.

NSW, WA and the NT all grew at a below trend rate, but accelerated. NSW's economy accelerated slightly in the March quarter though at a below-trend rate. The consumer and trade components made positive contributions, but the labour market deteriorated.

WA’s economy continued its slow recovery during the March quarter, with all components other than business improving. The overall rate of growth however was below trend, with only the labour market slightly above trend.

The ACT and Tasmania grew above trend and accelerated.