Western Australia is in the eye of an economic storm, according to the biannual Outlook report published today by the State’s peak business group.
This is the first Outlook to be released since the outbreak of COVID-19 and is the only non-government forecast of the WA economy conducted within WA.
The report by the Chamber of Commerce and Industry WA shows that the scale of fiscal support policies like JobKeeper and other measures including the early withdrawal of superannuation are currently propping up large parts of the economy. This is a unique economic situation.
Surveying the damage, the buffeting winds of COVID-19 have swept jobs, working hours and whole businesses overboard. Although some of the harshest restraints on WA businesses appear behind us, the pandemic has pulled the handbrake on the domestic economy, dragging it from 1.1 per cent growth in 2019-20 to a forecast contraction of -1.9 per cent in 2020-21.
The Federal Government in particular has provided extraordinary support to the WA and national economy. Looking ahead, WA must be prepared to battle stormy conditions again, with the scaling back and eventual expiry of enormous Federal Government support programs, coupled with brewing weakness in the global economy.
Unemployment in WA is set to reach 11 per cent, feeding a cycle of falling consumption (-3 per cent), falling business investment (-4.5 per cent), weak confidence and population growth plummeting to the lowest levels since 1916. Outside of mining, business investment nationally is expected to fall nearly 20 per cent.
Western Australians are likely to face more than a year of uncertainty and low appetite for spending, with fewer hours being worked and more people out of jobs. Unemployment could remain at 9 per cent into 2021-22.
The agility of WA businesses has helped keep our State afloat, with 85 per cent changing or adapting their operations, and one third taking on extra credit to cover overheads and pay wages — bailing out water in effect. The efforts of the WA business community were complemented by swift and proportionate support measures from the State and Federal Governments.
In the next stage, promoting business investment and confidence will be critical. Achieving even a 1 per cent increase in business investment in each year of our forecasts would make the WA economy $1.5 billion larger, approximately $1,400 per household. Creating a more competitive tax and regulatory environment is the surest way to attract much-needed investment to our State.
Read the full report, Outlook; Eye of the Storm – August 2020 here.
CCIWA Chief Economist