Victoria bounces back as South Australia's economic growth story continues

Last week, the latest economic growth by state was released for 2022. While Australia’s growth rate was 3.6 per cent, five states outperformed the average with Victoria and South Australia topping the list, both exceeding five per cent gross state product (GSP) growth over the past 12 months.

The strong growth in Victoria was particularly good news given that the economy contracted slightly in 2021 due to extended lockdowns during the pandemic. In 2021, Victorian GSP declined by 0.3 per cent. No surprises that the strong growth in 2022 was driven a lot by construction. Building is something that Victoria is particularly good at.

South Australia was the other strong performer. But unlike Victoria, this growth came straight after a very strong year in 2021 when South Australia was the strongest growth economy. Like last year, agriculture was the main driver of economic growth. Great weather in this state meant strong grain growing conditions.

The weakest state for economic growth was New South Wales. While it also benefitted from agriculture and construction, lockdowns at the end of 2021 meant bad news for retail trade, accommodation and food services. These all contracted during the year.

While interest rate rises have been causing havoc on house prices, economic growth is also a driver. NeoVal, Ray White’s data arm, has calculated that Australian house prices have contracted by one per cent over the past 12 months.

Sydney has seen the biggest fall, with prices declining by 8.2 per cent, consistent with high sensitivity to interest rates as well as lower than average economic growth.

In Victoria, prices also fell, showing that even strong economic growth wasn’t enough to balance out rising interest rates and a change in sentiment towards property.

Meanwhile, Adelaide tops the list for 12 month price growth, increasing by 5.6 per cent.