Boom in the West, slowdown in the East: on Australia’s split economy

Marina Karpathios
03:30pm July 01 2026

Even as the national numbers tell a single story, households experience varying economic climates depending on your postcode. (Image: Pexels)

Sydney and Melbourne’s housing markets are cooling, auction clearances are at Covid levels and slipping and many households feel tighter than they did a year ago.

 

Australia’s economy grew by only 0.3 per cent in the March quarter, down from late last year. But under the hood, the picture is split.

 

Households are pulling back, while business investment is picking up pace. Where you live is starting to shape which side of the coin you feel most.

 

A major build-out is now under way. Westpac Economics estimates $155 billion will be invested in data centres over the next decade, alongside another $200 billion in energy projects.

 

That spending is already flowing into jobs across construction, engineering and services, but the benefits are not shared evenly.

 

A recent, state-based Westpac economics report notes, “near-term activity is becoming increasingly geographically concentrated.”

 

Right now, that concentration is strongest in New South Wales and Victoria.

 

The result is a growing “two-speed” divide across the country, says Westpac senior economist Pat Bustamante. Some state economies are being lifted by large projects, while others rely more on household spending, which is slowing.

 

Here is how that divide is playing out across the states.

 

NSW: strong growth, weak spending

State demand grew 1.8 per cent in the March quarter and 4.6 per cent over the year, largely fuelled by business investment - including a 35 per cent jump in machinery spending in a single quarter, driven by investment in data centres.

 

New business investment surged 14.8 per cent in the quarter and 20.6 per cent over the year. But households are not seeing the same lift.

 

“NSW has not seen a correspondingly strong labour market story,” says Westpac economist Neha Sharma. Spending is weak, wage growth has lagged and unemployment is relatively high.

 

VIC: investment boom, uneven results 

Victoria is similar - business investment is rising fast, with machinery spending up more than 40 per cent over the year.

 

“Strong business investment has propelled Victoria’s economy, but growth remains uneven,” Sharma says.

 

At the same time, home building is falling, infrastructure work is slowing and spending per person is at a standstill, up just 0.2 per cent, so households have yet to feel the benefits. 

 

QLD: balanced growth

Queensland is in a stronger position - spending is still growing, up 3.1 per cent over the year.

 

“Household consumption continues to run at a robust pace,” says Westpac economist Ryan Wells.

 

That strength is supported by solid population growth, a relatively strong jobs market and higher energy prices boosting incomes. 

 

Olympics-related infrastructure adds to that mix, with both household spending and investment holding up.

 

WA: mining-led growth

Western Australia is seeing a return to familiar drivers, with mining set to re-emerge as a key growth engine. 

 

Strong commodity prices are feeding through to incomes, jobs and spending.

 

Housing is strong, with Perth prices up 25.8 per cent over the year, the fastest in the country. 

 

SA: public spending lifts activity 

South Australia’s economic growth is running at 3.8 per cent over the year, above its long-term average, largely thanks to public spending.

 

Meanwhile, defence and infrastructure projects are providing a steady base as private demand softens.

 

TAS: under pressure 

Tasmania is seeing the most strain - state demand fell 0.7 per cent in the March quarter, the weakest result nationally.

 

Households are more exposed here because a larger share of spending goes to essentials (around 67 per cent compared with 62 per cent nationally), resulting in any rising prices hitting harder.

 

Even as the national numbers tell a single story, households experience varying economic climates depending on your postcode. 

 

A version of this story was first published on Westpac IQ. 

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