An increase in exports and population growth is expected to drive WA’s economic expansion in the next six months, but inflation and concerns about China’s recovery will weigh on WA’s outlook.
CCIWA’s half-yearly Outlook report finds WA is poised for modest economic growth in the current financial year, forecasting the overall economy to expand by 2.5% in 2024/25.
The steady increase is expected to continue at a similar rate for the following years, with 2.25% growth forecast for both 2025/26 and 2026/27.
CCIWA’s Chief Economist, Aaron Morey, said despite the generally positive outlook, there will likely be a slowdown in momentum.
“Households continue to feel the pinch of higher living costs which will weigh on spending, while business investment is expected to consolidate at higher levels,” he said.
“However, improved export outlooks for iron ore and agriculture and solid population growth should help sustain economic activity over the next 12 months.”
Despite soaring living costs, household consumption in WA was higher in the 2023-24 financial year than previously forecast, driven by rising wages, property price increases and strong population growth.
“We expect household spending growth to slow to 2.0% this financial year as households consolidate their spending, however strong population growth should help to maintain baseline consumption levels,” Mr Morey said.
The Outlook report predicts WA’s housing market will continue to run red-hot, with population growth outpacing new home builds by more than five times in 2023.
“We expect the housing market to remain very tight in the medium term, with dwelling investment to rise by 3.75% in 2024-25 and 5.5% in 2025-26 as current supply constraints begin to ease,” Mr Morey said.
“Dwelling approvals have risen by 58.9% since June last year and there are more than 25,000 homes sitting in the pipeline, but supply-side constraints like high construction costs and skills shortages will continue to be a drag on the delivery of new homes.”
As expected, China’s slower than expected recovery will continue to weigh on WA’s economic growth.
“The ongoing slump in China’s property sector is showing no signs of improving, which in turn is impacting demand for iron ore from WA” Mr Morey said.
“While there are clear concerns around the current state of China’s economy, we’re optimistic in its future as it shifts towards lower, more sustainable growth rates.
“Also, a significant amount of steel will be needed to build transmission infrastructure needed in the global energy transition, which should support baseline production levels, aiding WA’s iron ore exporters over the longer term.”
The Outlook report found geopolitical tensions in the Middle East and Ukraine continue to fuel global economic uncertainty, as well as the looming US Presidential election.
“Globally, protectionism is on the rise, with more countries seeking to onshore or “friend-shore” their supply chains,” Mr Morey said.
“The number of trade restrictions has surged over recent years, with more than five times as many restrictions in place today compared to 2015.
“This growing geoeconomic fragmentation could further constrain trade, leading to weaker growth and the potential for higher and more volatile prices.”
