Aaron Morey
CCIWA Chief Economist
Western Australia’s economy begins the decade with weak business and dwelling investment, a contracting domestic economy and subdued economic activity. By these measures the economy is treading water, reinforcing the view that WA is merely surviving, not thriving.
This is the assessment in the Chamber of Commerce and Industry WA’s (CCIWA) biannual forecast for the WA economy, Outlook.
Weak business investment has reduced employment opportunities in WA, constraining growth in household income and consumption. Average household income is no higher than it was in 2012-13. Lower rates of property turnover and price growth have reduced consumption further. Completing the vicious cycle, weak consumer demand and growth prospects have weighed on business confidence. The upshot is the domestic economy is now 15 per cent smaller than it was seven years ago.
Looking ahead, there are renewed hopes the mining sector will once again lift the broader economy. Yet while new resources projects will boost business investment and construction activity, the coming investment bump will only amount to around 20 per cent of the most recent investment boom, meaning investment won’t ignite the economy like before. And a lot still needs to go right — around 50 per cent of projects in the pipeline are subject to final investment decisions, with the Browse and Scarborough LNG projects together accounting for around 30 per cent of the investment pipeline.
Demand for skilled workers will place some pressure on wages in some occupations. However, many people in WA are employed by small- and medium-sized businesses – which face growth in costs and little growth in profits, investment or productivity. This will constrain the ability of SMEs to grow wages and employment.
Importantly, as a State, we don’t have to sit by and wait for our fortunes to improve. Governments at all levels committed to reform can inject confidence into the economy and support conditions for business investment and growth.
An obvious next step would be to reform WA’s outdated shopping restrictions. The Government should also commit to keeping costs low for business and ensuring that no new taxes are imposed, accelerate the Streamline WA process, increase the number of occupations on the WA Skilled Migration List, and look at further measures to build a workforce for the modern economy.
There are reasons to be optimistic. With the state’s finances at a more sustainable position and recent cuts to payroll tax, Western Australia has a strong platform on which to build and reap the benefits of further reform.
As it has done for 130 years, the Chamber of Commerce and Industry WA and its members look forward to working constructively with government and playing a central role in improving the fortunes of the WA economy.
With the right reforms, we can ride the wave to greater prosperity.
