Australian states' economic performances are poised to diverge as national growth slows down through 2026 and into 2027, Westpac said in a Monday report.
The mining-based states of Queensland and Western Australia are once again expected to lead other regions as higher energy prices help drive sizeable income windfalls, which should provide a cushion for households against tighter financial conditions and help keep overall activity relatively resilient.
The bank expects gross state product (GSP) growth in Queensland to slow to a year‑average pace of 1.8% in 2027 from 2.6% in 2026, accelerating to around 2% in 2028, with Olympics‑related infrastructure spending reinforcing momentum, the bank said.
Like Queensland, higher dwelling prices are anticipated to support near-term demand through wealth effects in Western Australia, where Westpac expects GSP growth to moderate to 1.8% in 2027 from around 2.4% in 2026 before picking up to 2.4% in 2028.
South Australia is also relatively well-positioned, given strength in both public and private activity, the bank said.
However, the consumption-led states of New South Wales and Victoria are expected to underperform, with Victoria being the only state where consumption per capita is anticipated to fall below 2019 levels by 2028, Westpac said.
The bank expects New South Wales' GSP growth to slow to just 0.8% in 2027 from around 1.9%, and forecasts Victoria's growth to reach 0.7% in 2027 from around 2% in 2026.
"While rate cuts in 2028 should eventually stabilize conditions, the longer the global shock persists, the deeper and more uneven the adjustment across states is likely to be," Westpac said.