The Australian economy is starting to feel the bite of the housing market downturn, with four of the largest states seeing slower economic momentum over the past quarter.
Citing ANZ's latest Stateometer, Business Insider Australia said Victoria, Queensland, New South Wales and Western Australia are reeling under pressure as their economic momentum falls below trend.
This was an unprecedented turn of events, given that only Western Australia's economy was in the slumps over the preceding quarter. New South Wales, on the other hand, decelerated from an above-trend position. Meanwhile, Victoria and Queensland had previously recorded gains before nosediving in the current quarter.
"As we highlighted last quarter, the weighty housing sector has had a strong influence on the ANZ Stateometer. Every state, except Tasmania, experienced a drag from this component of their economies in the June quarter," economists Cherelle Murphy and Jack Chambers said, as quoted by Business Insider Australia.
For instance, despite leading other states in terms of construction activity and population growth, Victoria's economic trend fell to its lowest level in over three years due to the housing market sentiment. This was a result of the 1.6% quarterly decline in established house prices, the state's first drop in the last six years.
"Australian households are, on average, more vulnerable to changes in housing market sentiment due to high indebtedness," the two economists said.
Aside from the housing market drag, ANZ's Stateometer also pointed out to the reduced business confidence as one of the reasons for a muted economic momentum.
However, there are positive factors that could offset the housing downturn. For one, the Stateometer showed promising results in terms of labour markets, investment, and public infrastructure projects.