A new KPMG Economics report examining the comparative resilience of Australia’s states and territories to deal with economic, social and community shocks ranks the ACT highest – although this is starting to slip.
Victoria ranks as Australia’s second most resilient jurisdiction, because of its strong economic capacity. NSW ranks third, marginally ahead of QLD and WA.
The ACT’s top place – maintained from the inaugural study in 2015 – is due to strong social and community factors, although this has taken a downturn in the last 2 years.
The new report also shows a close correlation between resilience and growth, with ACT, Victoria and NSW’s growth rates from 2014-2018 mirroring their top three resilience rankings.
KPMG’s ‘Australian Regional Capacity Index’ (ARCI) compares the states and territories by 12 indicators, grouped in three categories – economic, socio-demographic and ‘community connectivity’.
The single statistic which gives each jurisdiction its ranking is made up of 12 equally weighted indicators, classified into one of three capacity types:
Dr Brendan Rynne, KPMG Chief Economist, said: “It is important to recognise that resilience does not equate to success, although our report does show a correlation between adaptability and growth. The index is not trying to measure absolute economic growth, but rather to quantifiably assess the settings available to achieve growth in a post-shock environment. The better a region is able to collectively enhance economic, socio-demographic and community outcomes the more likely it will be to withstand adversity and bounce back quickly. Adaptability is about being able to move away from the economic past and achieve a better outcome.”
“During the last four years, Australia and its states and territories have experienced a range of domestic and global influences. Locally, these include natural disasters, such as major drought conditions afflicting most parts of Eastern Australia and flooding in Queensland; and changes in business conditions such as the substantial closure of the car manufacturing industry in South Australia and Victoria. International influences include the trade war between the US and China and commodity market fluctuations, in part driven by the iron ore mine closures in Brazil.”
“The implications of our report are that policy-makers need to ensure not only the fundamentals of a diverse, investment-orientated economy but also that the necessary complementary building blocks of an educated, healthy population exist, while at the same time providing the environment for a safe and engaged community.”
Other key factors that explain the movement in the economic index the states and territories since 2014 include:
The KPMG ARCI incorporates each of the 12 resilience capacity indicators, weighing each indicator equally, creating the effect that individual indicators are ‘worth’ the same as each other in the composite measure. It does not attempt to measure absolute growth, either economic or population; rather it seeks to quantifiably assess the settings available to achieve growth in a post-shock environment. In some regards the ARCI is analogous to the relativity values used by the Commonwealth Grants Commission top determine its differing GST payments to the states and territories.
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KPMG has followed a similar methodology applied to construct the Regional Capacity Index for the United States of America (USRCI), developed by the University at Buffalo Regional Institute, State University of New York, in association with the Institute of Government Studies at the University of California, Berkeley.
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