WA is well poised to mitigate the worst impacts of a turbulent period ahead for the world economy, with CCIWA’s latest Outlook report predicting that while economic growth will be moderate the State should have an easier landing than most.
The biannual report — the only WA-based non-government economic forecast — shows the WA economy has ridden the waves of global commodity strength and fiscal support. But rising interest rates and costs of doing business are bringing us back to earth.
On the trade front, China remains fixed upon ‘COVID-zero’ and continued restrictions on Australian goods, a key risk to WA’s growth. Meanwhile, there is an ongoing war between Russia and Ukraine — two countries that “play a significant role in the supply of key agricultural and energy commodities”.
“Western Australia is not immune to these global developments,” the report said. “CCIWA’s quarterly Business Confidence Survey has revealed nine out of 10 businesses are experiencing supply chain disruptions, with higher input costs and delivery delays identified as the two largest impacts. Ongoing skilled labour shortages inflict additional pain, with nearly four in five WA businesses struggling to fill skilled positions.”
However, amidst an increasingly turbulent and unpredictable global economic backdrop, WA’s economic fundamentals remain strong. WA is in solid shape, with 4.5 per cent growth and a domestic economy 9.3 per cent bigger than pre-COVID levels and record number of West Australians in full-time employment.
Looking ahead, in 2022-23, WA’s growth looks set to slow to 3 percent.
Underpinned by an 8.25 per cent surge in business investment in projects like Woodside’s Scarborough and Pluto 2, workforce demand will remain strong with the unemployment rate set to average 3.75 per cent in 2022-23.
“The slowing global economy and stabilising commodity prices will gradually see inflation ease, but prices are expected to keep rising for the rest of this year,” CCIWA Chief Economist Aaron Morey said.
“While the jobs market will remain strong, the pressures of interest rates and inflation will ultimately see consumption slow to 1.75 per cent in 2022-23.”
Morey said the changing global conditions vindicate CCIWA’s calls to reinforce and diversify WA’s economy with economic reform.
“To relieve the rising costs of doing business and spur diversification, WA should reform payroll tax, which is higher for businesses in WA than any other State across a range of taxable wages. We must also help SMEs to lower their emissions profile in order to stay globally competitive.
“If we can get the right policy settings in place, WA will nail its landing out of COVID.”