NSW economy strong, but dangers loom on horizon

IT HAS outshone every other state and territory in the country, but two looming dangers threaten to spoil the New South Wales economy's glowing record unless cleverly managed this year.

The NSW Parliamentary Service has released its latest assessment of the state's finances. As far as report cards go, it is one mum and dad would be proud of.

Unemployment fell 0.6% to 5.3% over the last three months of the year and remained the lowest in the country.

Household spending underwent the biggest increase of any state or territory over the September quarter, rising 0.9%.

It jumped 2.8% over the entire year, falling just behind Queensland's 3.1% rise.

The higher consumption rate had a lot to do with NSW residents' increased spending on motor vehicles (up 11% over the year) and electricity and gas (up 7.4%).

Exports were also on the rise, along with retail trade and job vacancies, which ended the year at 59,700 - 21% above the three-year average of 49,400.

It all spells a bright short-term future for Australia's richest state.

But research officer Andrew Haylen warned an end to Sydney's property bubble and falling investment in mining could spell trouble.

"Looking ahead, the general expectation among forecasters is that Sydney property prices will rise in 2016, albeit at a much slower pace than in 2015," he said.

"That being said, few would have predicted at the beginning of this year that Sydney would incur negative price growth before the end of 2015.

"As such, the trajectory of house price growth in the current market is near impossible to predict with confidence."

Mr Haylen said history showed the aftermath of Sydney property booms could dampen the entire state's economy.

He said diversifying the economy was key to weathering the storm.

"In this context, other areas of the state economy - particularly non-mining business investment - will need to perform over the longer run if economic growth and improved labour market outcomes are to be sustained once the housing sector slows," he said.


NSW's top five merchandise export markets in November

  • Japan - $759 million
  • China - $465 million
  • Korea - $272 million
  • United States - $216 million
  • Taiwan - $121 million

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