Around 216,000 jobs have been added in NSW since the low-point in May, when the state was in lockdown. Independent economist Terry Rawnsley said the recovery was exceeding expectations.
“If you’d said to me six months ago that NSW would have an unemployment rate of 6.5 per cent coming into the end of the year I would have been pretty happy to take that number,” he said. “The economy has bounced back fairly quickly.”
House prices in Sydney have also been resilient – another positive sign for the broader economy. The ups and downs of the city’s property market has had an important influence on the performance of the economy in recent decades.
AMP chief economist Shane Oliver said the “stronger than expected” economic rebound in NSW was a testament to the way the virus has been kept under control.
“That has given people the confidence to get out there and spend,” he said.
The recent run of positive indicators follows a miserable period for the economy caused by the bushfire crisis and coronavirus pandemic.
The Bureau of Statistics’ report on the yearly economic output of each state, released last month, showed NSW shrank by 0.7 per cent in the year to June 30. It was the first time NSW has registered an annual economic contraction since the bureau began publishing figures on gross state product more than 30 years ago.
Mr Rawnsley described the economic turmoil as a “generational” slump for NSW but says a robust run-up to Christmas will set up the state for a sustained recovery in 2021.
“It’s really important that we have a good end to the year,” he said. “If we have cautious spending during that Christmas period some business might not make it through and that will have some negative flow on effects.”
The strength of the NSW recovery will be tested as emergency government support programs introduced during the pandemic are wound back, especially JobKeeper wage subsidies and the coronavirus supplement paid to JobSeeker recipients.
The continuing closure of international borders means key sectors of the NSW economy including foreign tourism and international education remain in the doldrums.
Despite recent employment growth, the state’s jobless rate is still 2 percentage points higher than at the beginning of this year and there are about 85,000 fewer jobs in NSW than in August last year.
Last month’s state budget forecast the economy to contract by three quarters of a percentage point this financial year before returning to a growth of 2.5 per cent in 2021-22.
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Matt Wade is a senior economics writer at The Sydney Morning Herald.