Note: This is an op-ed based on the Australian portion of a paper I wrote (summarized here). I also wrote a similar op-ed based on the Canadian portion of the paper. I wasn't able to find homes for these pieces, so I am posting them here.
Had Leo Tolstoy been a Canberra bureaucrat, he might have written, “Every state and territory is economically unhappy in its own way.” Across Australia, after initially surging after the pandemic, growth is uneven and faltering. National economic trends mask increasing divergence among the states and territories.
Instead of national figures, we should instead examine the local data from the State Accounts for 2024-25. By controlling for inflation (using chain volume or real GDP) and population (taking per capita figures), we can better determine actual levels of growth. Real/chain GDP per capita reflects the average economic output produced by per person; this makes it an excellent proxy for measuring standards of living and productivity. Higher inflation and population growth, as have recently occurred, can otherwise mask underlying economic weakness.
Carefully examining these figures (as I did in a recent study on growth in Australia, Canada, and the United States, in The Journal of Regional Analysis and Policy) shows that although Australia’s real GDP per capita rapidly recovered from the COVID-19 slowdown at the national level, this was not always true at the local level.
We may in fact speak of three Australias. New South Wales, Tasmania, South Australia, followed Australia’s national trend, though the latter two recovered slightly faster. (New Zealand also matched this pattern, with a one year lag.) Western Australia and the Northern Territory performed better still, facing negligible contractions, and the ACT was the one part of Australia to escape a pandemic-era recession. On the other hand, Queensland saw Australia’s sharpest real GDP per capita contraction (double the national average). Along with Victoria, it took an extra year to return to its pre-pandemic level.
By 2022, it appeared that Australia had returned to healthy growth again; but in 2023, the music stopped.
Since then, real GDP per capita has been falling across most of the country: in Victoria, it has already contracted as much as during the pandemic. Reversing the pattern of 2019-21, the sharpest declines have been in the Northern Territory and Western Australia. New South Wales and South Australia are also contracting, though more slowly, and real GDP per capita has plateaued in Queensland. Though the ACT continues to grow unabated, Tasmania is Australia’s current economic star, defying the slowdown in the bigger states.
This trend is more alarming when compared to the United States. Although real GDP per capita generally fell more sharply across the fifty states during the pandemic, since then, American growth has surged: as of 2024, real GDP was growing in every part of the U.S. except in Washington D.C. Australia’s performance unfortunately resembles Canada’s, where the post-pandemic recovered faded out in 2022—a commonality that Prime Minister Mark Carney was unlikely to highlight during his recent visit.
Of course, there is no shortage of economic data and statistical metrics; real GDP per capita are simply two among many. Perhaps Australia’s next batch of economic data will be better: but given the economic turbulence last year, it seems doubtful that the Lucky Country registered rip-roaring growth.
Yet if Australia is to forge its own way in the world, it will need to sustain robust growth, and in every part of the country. As the real GDP per capita figures clearly show, every state and territorial economy is different. A vast share of the blame for recent weak growth sits with state and territorial Executive Councils, and Premiers should prioritize concrete measures to raise local productivity.
Canberra also bears a heavy responsibility. To improve growth, the Cabinet and the Treasury should tailor policies to conditions in the states and territories and avoid the sort vague, one-size-fits-all strategies that led to significant wasteful spending during the pandemic. The hardest-hit parts of the country deserve no less.
As Tolstoy the civil servant could have written, along with order and good government, Australians are in need of Prosperity & Peace.
