COVID-19 will deliver Australia’s first recession in 28 years, beginning the slide with a national contraction of 0.3 per cent in the March quarter. With the economy, confidence and jobs belted by measures required to arrest the virus, next quarter’s results will encompass the worst impacts on businesses and are all but assured to confirm the terms of a recession.
While other States were buffeted by significant and widespread bushfires in the March quarter, Western Australia’s domestic economy grew by 0.9 per cent, ahead of Tasmania as the only State to record growth. The ABS has confirmed that Western Australia’s solid result was driven by the mining sector. Other parts of the economy were clearly in a very weak state, with the household spending chill identified in CCIWA’s last Consumer Confidence Survey remaining the biggest drag on growth, continuing to withhold billions of dollars from local businesses and the economy.
Rattled by the economic uncertainty, WA consumers have bunkered down, a punishing blow for hotels, cafes, restaurants (-7.8 per cent), transport (-10.3 per cent), clothing and footwear (-11.8 per cent) and other sectors reliant on discretionary spending. Western Australians even appear to have doused their cigarettes, with spending on tobacco down 5.6 per cent.
At the beginning of 2020, CCIWA characterised the WA economy as treading water. Buffeted by the coronavirus, our State is now swimming against the riptide currents of recession. But we do not have to accept our economic fate. The business community has worked productively with governments to secure supportive conditions for WA’s recovery, through measures like planning and regulatory waivers, electricity and license fee relief and a cut to payroll tax. It is important to emphasise that WA’s solid result was driven by investment in the mining sector; while welcome, this masks weakness elsewhere in the economy. Bold reform is still required, shifting to broad-based taxes, further improving the regulatory system and strengthening our skills and infrastructure, to better position our State to take on the challenges of the recovery phase and return to growth.
CCIWA Chief Economist