Australia Viewpoint: Australian State and Territory Economies

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Australia Viewpoint: Australian State and Territory Economies

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Australia Viewpoint

Australian State and Territory Economies

A primer on the Australian states and territories 21 May 2026

We examine the key differences across Australian state and territory economies, their Economics

fiscal relationship with the Federal government, and provide an overview of the Australia

semi-government bond market.

Table of Contents

Resource-rich vs service-driven states

Australia’s state economies can be broadly characterised by a divide between resource- Australia States & Territories Overview 2

driven and service-oriented growth models. Australia’s resource-rich mining states, Economic ‘State’ of Play 5

Western Australia and Queensland, have high GSP per capita and growth prospects are Vertical & Horizontal Fiscal Imbalance 12

closely linked to global commodity demand, the export sector, and terms of trade Sovereign & State Ratings 16

dynamics. In contrast, New South Wales and Victoria are the largest states by population Semi-government Bonds 18

and GSP, with growth driven by diversified services sectors making them more sensitive Appendix: State economy background 27

to domestic demand, population growth, and financial conditions. Smaller states and

territories generally have more mixed economic structures, with South Australia and

Economics

Tasmania exposed to agriculture, manufacturing and tourism, while the ACT is largely Nick Stenner, CFA

driven by public sector activity. Australia & NZ Economist Merrill Lynch (Australia)

+61 2 9226 5031

Vertical and horizontal Imbalance nick.stenner@bofa.com

Australia’s federal system features both vertical and horizontal fiscal imbalances, which Johnny Liu, CFA Australia & NZ Economist