Quarterly states and territories chart pack: Divergence in gross state product across states

In brief

• The annual reading of state and territory economic growth shows that while all jurisdictions grew in FY25, on a per head of population most did not.
• Only the Australian Capital Territory (ACT), Tasmania and Queensland Gross State Product (GSP) per capita moved higher over the year and on an unadjusted basis, GSP growth was below the long-term pre-pandemic average rate in all states and territories.
• The health care and social assistance industry supported all state and territory economies due to strong demand for health services. Strong growth in the financial and insurance services industry was also a key contributor for most states.
• According to state budgets, most states and territories are expected to see a recovery in growth in FY26 compared to FY25, though slightly weaker growth is expected in the ACT.

The national economy grew 1.4 per cent in FY25, unchanged from the result in FY24. GSP rose in all states in FY25.The fastest growing economy was the ACT, at 3.5 per cent, followed by Queensland at 2.2 per cent. New South Wales recorded the slowest growth rate, at 0.9 per cent. All states and territories experienced solid growth in the health care and social assistance sector, driven by strong demand for health services. Strong growth in the financial and insurance services industry was also a key contributor for most states. Mining detracted from growth in Queensland, Western Australia and the Northern Territory due to weather and maintenance disruptions. Overall growth was below the long-term average rate in all states and territories.¹

When adjusted per head of population, GSP was strongest in the ACT, rising by 2.1 per cent, followed by Tasmania with a 0.7 per cent rise. GSP per capita contracted in most states and territories, with the weakest result in Western Australia, which recorded a fall of 1.1 per cent.

GSP growth in Western Australia and Tasmania was stronger than expected by their respective state Governments in the most recent budgets. In New South Wales and Victoria, growth was much weaker than forecast by state budgets. According to state budgets, most states and territories are expected to see stronger growth in FY26 compared to FY25.

The New South Wales economy increased by 0.9 per cent in FY25, which was below NSW Treasury’s forecast of 1.8 per cent growth in FY25 and well below its long-term average growth rate of 2.4 per cent. Goods exports made the largest contribution to growth, adding 1.1 percentage points to GSP. The agriculture, forestry and fishing industry recorded the largest rise due to a strong grain harvest and livestock growth. Finance and insurance services, which is the biggest industry in NSW, also recorded strong growth. The construction industry was the largest detractor from growth, recording a decline as major infrastructure projects in transport and health approached completion. Going forward, NSW Treasury expects growth to pick up to 1.8 per cent this financial year before increasing further to 2.3 per cent by FY27.

Victoria’s economy grew by 1.1 per cent in FY25, below its long-term average growth rate of 2.6 per cent and was weaker than forecast by Victoria’s Treasury at 2.0 per cent. Government consumption made the largest contribution to growth, adding 1.0 percentage points to GSP. Victoria’s economy is primarily built upon the financial services and healthcare and social assistance industries, both of which recorded strong growth. Professional, scientific and technical services detracted from growth as there was less accounting, engineering consulting and defence related services activity in the year. Victoria Treasury projects growth to increase to 2.5 per cent this financial year, increasing to 2.8 per cent by FY27.

Queensland recorded an increase in GSP of 2.2 per cent in FY25, which was slightly weaker than the 2.5 per cent forecast by Queensland Treasury earlier this year and slightly below its long-term average of 2.4 per cent. Government consumption rose strongly, adding 1.5 percentage points to GSP. The agriculture, forestry and fishing industry made the strongest contribution to growth due to improved growing conditions and livestock production. Construction recorded a solid rise reflecting increased dwelling construction and transport infrastructure. Professional, scientific and technical services also saw a strong lift as the significant infrastructure pipeline led to greater engineering design and consulting work. The mining industry was the largest detractor from growth due to bad weather conditions and lower demand for coal. Queensland Treasury expects growth of 2.8 per cent this financial year. Growth is expected to remain around this level for the next few years given the strong pipeline of capital projects, including those related to the Brisbane Olympics. Elevated population growth is also expected to support household consumption.

Western Australia’s economy grew by 1.3 per cent in FY25, which was above WA Treasury’s forecast of 0.5 per cent as outlined in the May budget. But growth remains well below its long-term average rate of 3.7 per cent (which includes record-high growth during the mining boom). State final demand contributed strongly to growth in FY25, while net exports detracted from growth. The construction industry recorded strong growth, reflecting the highest population growth rate in the country and the associated elevated demand for housing. The agriculture, forestry and fishing industry also grew strongly due to favourable grain production. Meanwhile, mining detracted from growth, as both the iron ore and liquified natural gas (LNG) sectors were impacted by weather and maintenance shutdowns. WA Treasury expects growth to pick up to 2.5 per cent this financial year before increasing further to 3.0 per cent by FY27.

South Australia’s economy experienced growth of 1.0 per cent in FY25, which was below SA Treasury’s forecast of 1.3 per cent for FY25 and its long-run average growth rate of 1.3 per cent. Government consumption made the largest contribution to growth, adding 1.4 percentage points to GSP. The construction industry grew strongly as residential construction increased significantly. Financial services and insurance also recorded a solid rise over the year. Healthcare and social assistance, which is South Australia’s largest industry, added to growth, increasing in line with the rest of Australia. The agriculture, forestry and fishing industry was the largest detractor from growth, reflecting dry weather conditions which reduced crop production. SA Treasury expects growth to increase to 1.8 per cent this year, increasing to 2.0 per cent by FY27.

Tasmania’s economy increased by 1.0 per cent in FY25, which was well above Tasmania Treasury’s forecast of no growth in FY25 but below its long-run average growth rate of 1.7 per cent. Underlying public investment made the largest contribution to growth, adding 2.6 percentage points to GSP. The agriculture, forestry and fishing industry recorded the highest growth due to strength in aquaculture and dairy. Health care and social assistance also grew strongly driven by high demand for health services. Weakness in construction activity detracted from growth, driven by residential construction. Tasmania Treasury expects growth to remain at 1.0 per cent this financial year, with the growth rate increasing to 2.3 per cent by FY27.

The Northern Territory’s economy grew by 1.0 per cent in FY25, which was significantly better than the NT Treasury’s forecast of a fall of 2.6 per cent, although below its long-term average growth rate of 2.0 per cent. Household consumption made the largest contribution to growth, adding 1.0 percentage points to GSP. The agriculture, forestry and fishing industry grew strongly due to higher livestock production. The mining industry detracted from growth due to weather disruptions impacting oil and gas production. The NT Treasury expects GSP to increase by 7.8 per cent this year driven by an improvement in LNG and manganese exports. Further growth of 5.9 per cent is forecast in FY27 as production at Darwin and Ichthys LNG plants reach full capacity.

The Australian Capital Territory saw the strongest annual increase of all states and territories at 3.5 per cent in FY25, following growth of 3.6 per cent the previous year. This was in line with the ACT Treasury’s forecast and slightly below the ACT’s long-term average growth rate of 3.7 per cent. Government consumption made the largest contribution to growth, adding 5.3 percentage points to GSP. The result reflects strong growth in public spending, due in part to the 2025 Federal election. ACT Treasury expects growth to slow to 3.3 per cent this financial year, before picking up again and reaching 3.8 per cent by FY28.

While the national economy is likely to experience a further recovery in growth, it appears to be close to its capacity, suggesting that growth potential may be limited. Despite the moderation in inflation over the course of FY25 and the commencement of the cash rate cutting cycle by the Reserve Bank in February, productivity growth remains very low. While cost-of-living support and higher real incomes support household consumption, the tick up in underlying inflation to the top of the Reserve Bank’s target band in the September quarter is a concern.

Most states and territories are expected to see stronger growth in FY26 compared to FY25, though slightly weaker growth is expected in the Australian Capital Territory. Labour markets remain relatively tight, with unemployment rates having gradually increased in most states and territories but remaining historically low. Business confidence is improving in most states and territories and some of the worst fears from trade disruption caused by the United States tariffs look to have been avoided. Meanwhile, the housing market continues to grow strongly, supported by lower interest rates, which should support dwelling investment moving forward.

National Accounts data for the September quarter (to be released on 3 December), the Commonwealth Mid-Year Economic and Fiscal Outlook (MYEFO, expected mid-December) and state mid-year budget updates will provide more insights into the economic recovery before the end of the year.