ACT News

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Lowest spending growth in nation

Canberra's retail sector is suffering from the lowest rate of consumer spending growth in Australia and inflation is outstripping wages growth.

But solid housing activity has kept the ACT in the second tier of what has become a ''three-speed economy,'' according to a report on the economic performance of the state and territories to be published by CommSec today.

Another report to be issued today - by Deloitte Access Economics - warns that the ACT's short-term economic outlook is modest due to Federal Government budget cuts and that a new national economic stimulus package may be necessary if Europe is plunged into a major recession.

The CommSec report showed resource-rich Western Australia had consolidated its position as Australia's strongest economy, with economic output 28per cent higher during the September quarter than the state's decade average.

The ''second-tier'' consisted of the ACT and Victoria, with the ACT's economic output growing by 18.7per cent compared to the decade average. But consumer spending in the ACT was lagging behind the rest of the country. The CommSec report said, ''ACT is now at the bottom of the leaderboard, with spending up just 6.4per cent on the decade average, Spending is also 2.7per cent lower than a year ago.''

While the ACT's unemployment rate of 3.8per cent was the lowest in Australia, it was 10per cent above the territory's decade average of 3.4per cent, constraining retail spending.


Wages in the ACT were 2.9per cent higher than the previous year during the September quarter, but consumer prices rose by 3.7per cent and home prices fell by 1.6per cent.

Housing lending fell by 6.5per cent but the ACT still led the country on dwelling starts and had 1.9per cent population growth. ''The ACT is at risk of slipping as housing activity eases. Still, population growth remains above long-term averages, preventing any major slowdown of the economy,'' CommSec said.

In a business outlook report subtitled ''Eurogeddon'', to be issued today, Deloitte Access Economics warned that the ACT's short-term outlook had been hurt by the Federal Government's decision to increase efficiency dividend budget cuts to 4per cent.

Deloitte access partner Chris Richardson said that in the current economic climate, the promises by both sides of politics to swiftly return the budget to surplus could be hurting the economy more than they were helping it.

''Both the feds and the states need to repair their budget positions over time, but pulling money out of 2012 may unnecessarily add to risks at a time when both families and businesses are already super-cautious,'' he said.

Mr Richardson said Australia's economy would grow strongly if the world ''muddles through'' global economic problems.

But he warned the Federal Government needed to take unpopular action if the European economic situation worsened and threatened Australia.

''Australia's fiscal stimulus last time was a striking success - it simply wasn't seen that way in the court of public opinion,'' Mr Richardson said.

''That gap between reality and perception threatens a poor reaction by the punters if a new stimulus is needed in 2012.

''That means Australia runs the risk of being hoist on the petard of the received wisdom of talkback radio. Let's hope that doesn't happen.''