Western Australia’s economy strengthened in 2025-26, but persistent inflation and the Middle East conflict are expected to slow growth and household spending over the next six months, according to our latest economic forecast report, Outlook.
The private sector drove much of the State’s growth over the financial year. WA also led the nation in household consumption growth, with spending rising 2.4% over the year.
Global pressures weigh on growth
CCIWA Chief Economist Dr Daniel Kiely said WA’s economy is entering a tougher period.
“The WA economy has very strong foundations but it’s being pulled in different directions and there is no doubt global economic factors and high inflation will start to have an impact,” he said.
“The conflict in the Middle East is putting further pressure on growth and supply-side inflationary pressures are weighing on momentum.
“Fortunately, global energy supply chains have proved more resilient than many feared at the start of the conflict, but significant challenges remain.”
Persistent inflation leaves room for more rate rises
Perth’s annual inflation reached 4.3% in August, above the national rate of 4%. Housing, transport and other essentials continued to record strong price increases.
The Reserve Bank of Australia (RBA) has lifted the cash rate five times in 2026 to 4.85%, with further increases possible if inflation remains elevated.
“The RBA faces a longer road back to target inflation than expected, with inflation broader and more persistent than we would like,” Kiely said.
“The Middle East conflict continues to complicate the inflation outlook, making it very difficult to predict the impact the longer the conflict continues.”
Housing demand holds up as price growth cools
WA’s housing market remains strong despite a slowdown in price growth.
Kiely said WA’s housing market remains strong, despite a cooling of rampant price growth.
“In WA we’re seeing a strong pipeline of dwelling investment, driven by strong population growth and significant government investment in housing,” he said.
“We expect demand to remain high, although we can expect to see that dampened somewhat by increasing interest rates.”
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