Lower rates to benefit Victoria, NSW most

New South Wales and Victoria will be the main beneficiaries from low interest rates and a falling Australian dollar, as Western Australia struggles from a winding back in mining investment.

New South Wales and Victoria will be the main beneficiaries from low interest rates and a falling Australian dollar, as Western Australia struggles from a winding back in mining investment.

With the official cash rate falling 200 basis points to 2.75 per cent since November 2011, "heavily mortgaged families" in NSW will have more financial flexibility, according to the Deloitte Access Economics Business Outlook report.

"It also helps explain why retail sales have been in line with, or even better, than those nationally," it said.

Deloitte predicts NSW gross state product (GSP) growth to remain steady at 2.4 per cent for 2012-13, before rising gradually over the next two financial years.

Victoria has struggled in recent years with the Australian dollar above parity for an extended period.

"The announcement of Ford's plans to cease local manufacturing at its Geelong and Broadmeadows plants in late 2016 helps to attest the Australian dollar is pressuring many firms," Deloitte said.

But if the dollar keeps falling, as economists predict, Victoria will hope it can regain ground in tourism and international education.

"Victoria is still growing and, compared with many other states, it boasts better infrastructure, better land release and reasonable population growth prospects."

Victorian GSP growth is tipped to be 2 per cent for past financial year before jumping to 2.6 per cent by 2014-15, Deloitte predicts.

The situation is more dire in WA, which isn't in recession, but it is slowing quickly.

For the past financial year, the West Australian Department of State Development forecasts GSP to grow by 6 per cent. Deloitte predicts 5.6 per cent.

For this financial year and 2014-15 Deloitte forecasts a significant slowdown, falling to 3.3 per cent, then 1.9 per cent.

Deloitte said WA benefited most from the mining construction boom, so it was natural it would be more exposed that other states when investment eased. "[Miners] are especially cautious with developments in WA. That is because costs have risen enormously here, placing Australia at a competitive disadvantage in fighting for our share of the next round of resource spending," it said.

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