Victoria tops states for growth and construction: CBA

The news: Victoria has returned to the top of the Commonwealth Bank's State of the States report for the first time in more than a year. The southeastern state ranked first in economic growth and construction work, buoyed by strong retail spending, business investment and seven-year high population growth, according to CBA.

The numbers: Victoria's economic activity was 7.7% above its four-year average and equipment investment hit record highs, up 19.7% on its ten-year average. CBA economists also said there was little separating the top six economies, with South Australia moving from second to third, followed by NSW, Queensland, Western Australia, Tasmania, the ACT, and the Northern Territory. Victoria was ranked fifth in the most recent survey in July.

The context: Victoria also takes the lead in state debt, with S&P forecasting the state to owe $226 billion by 2026, with NSW close behind on $221 billion. They currently hold debts of roughly $170 billion and $160 billion respectively. Total debts for all six states are expected to balloon to $688 billion, or roughly 27% of gross state product by FY26, as the high interest rate environment continues to take its toll on pandemic and post-pandemic infrastructure spending.

What they said: “While the lift from fifth to first is surprising, we knew coming into this quarter there was little to separate the economic performance of the states and territories. We expect Victoria to face challenges from the other economies in the period ahead," CBA chief economist Craig James said in a statement.