Tasmania: the southern state’s heading north

Last financial year the Tasmanian economy swelled 3.3 per cent and another 3 per cent growth this year is not out of the question. This from a state where structural challenges – including an older age profile, high exposure to agriculture and lack of mineral wealth - had resulted in an average annual growth rate of just 2 per cent for two decades. 

"Tasmania has seen the strongest overseas migration on record, with a net 2,500 settling in the year to September 2018.”

The wealth effect from the highest house price growth in the nation has been encouraging households to spend. And households are important, with just under 6 dollars in every 10 spent in the economy coming from their wallets. 

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Moreover, the business sector has been on the up, with non-residential construction growing steadily. Several road and rail projects could lift this further, helped by recent commitments from the Commonwealth Government.

Tasmanian businesses are saying “times are good” - they are reporting better conditions than any other state or territory.

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As a result, Tasmania has seen the strongest overseas migration on record, with a net 2,500 settling in the year to September 2018. That number was also nearly matched by other Australians heading across Bass Strait to take up residence.

However, there are warning signs ahead. The ANZ Stateometer found Tasmania’s economic activity slipped below its long term trend rate in the March quarter after two strong years.

ANZ Research expects Hobart house prices will correct over the next two years - although by less than other Australian capitals - while house building approvals are now off their peak (but still strong).

Another area for note is employment. Official data suggest Tasmania’s unemployment rate was 7.6 per cent for females in April, up from 5.3 per cent a year ago. For males it was 6.1 per cent in April, down from 6.5 per cent a year ago. That compared poorly with the mainland.

However, given the rising female unemployment rate is a little at odds with the activity data, ANZ Research thinks it’s possible that rate will adjust downwards again.

Demographically, Tasmania is relatively old but for those industries leveraged to ageing that’s good news. The economy has a larger concentration of the strongly growing health and social assistance sector than any other state or territory.

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Another sector with great potential is obviously tourism, particularly as the Apple Isle’s food and drink reputation grows and its prices are helped by the falling Australian dollar.

Currently only around 1 per cent of visitors to Australia place Tasmania at the top of their destination list but that proportion is growing quickly and ANZ Research expects it to keep on doing so.

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That said, we won’t be joining the swimmers plunging into the Derwent on the winter solstice for Dark Mofo’s annual swim.

Cherelle Murphy is a Senior Economist at ANZ