WESTERN Australia’s economic blues could soon be a thing of the past, according to new analysis from the state business advocacy group.
The Chamber of Commerce and Industry of Western Australia’s (CCI) recent Outlook report forecast that business investment will stop falling during the current financial year and grow 3% in 2018-19.
Outlook is CCI’s biannual analysis of the Western Australian economy.
The domestic economy – which measures the economy without exports and is also known as State Final Demand (SFD) – is tipped to return to growth next financial year, returning from -15% during 2017-18 to 2.5% growth
CCI chief economist Rick Newnham said the new Labor state movement must avoid increasing the rate of taxes, fees and levies applied to business in the upcoming budget, to ensure the economy has a realistic chance of recovery.
“Business investment is a critical driver of economic prosperity – when business investment grows, it creates a domino effect throughout the economy, where more big construction projects come on line, more money comes into the economy and more jobs are created for WA workers,” Mr Newnham said.
“The only reason WA has avoided a recession is the growth in export income coming from completed mining projects – if you look at WA without exports, you can see that in the domestic economy, investment in business and the housing market have ground to a halt, and both the WA government and households have slowed down their spending,” he said.
“Export growth will be short lived however, which is why the WA government needs to usher in a new era of business investment by not raising taxes, fees or levies on business in the coming budget.
“CCI believes that WA is now 88% of the way down the business investment cliff – thankfully, the worst is now behind us. Once investment returns to positive territory and the domestic economy begins to grow, we will see the entire economy start to recover.”
Mr Newnham said it was critical the state government encourage investment and increased spending across the economy.
The report also examined how jobs in WA would look if population growth stayed at mid-boom levels.
“Unfortunately, the average annual unemployment rate is also forecast to persist above 6% for the rest of the decade – the business community creates four out of five WA jobs, so it is critical the state government does not restrict the business community with increased taxes, fees or charges, so business can continue to create jobs for workers,” Mr Newnham said.
“CCI’s modelling also shows that part-time job creation has meant an extra 74,000 West Australians have stayed in the work force – had this amount of part-time jobs not been created, unemployment would be at a shocking 11.6%, so it’s important we understand how important part-time jobs have been in breaking the fall.
“CCI’s new model allows us to peer into the economic crystal ball and see what could have been and what is just over the horizon – CCI is proud to help business work by developing the most comprehensive set of forecasts outside of government, that continue to help our members make strategic decisions about their future.”
The report makes particular note of international trade, with exports from WA forecast to grow “significantly” during the next three years.
“Growth in LNG exports driven by the start-up of the Wheatstone and Prelude projects’ production will drive export growth in the near future,” the report states.
“Iron ore exports are expected to grow slightly in the near future, as there is some downside price risk that could drag down total iron ore export value.”
Regarding imports, machinery and equipment for new business investment is expected to fall during the next two years as construction projects slow or are completed.
“However, household consumption and the demand for imported goods will slowly recover over the forecast horizon,” the report states.
“Overall, we forecast imports to have negative growth of -12% in 2015-16 before returning to positive growth of 0.5% and 2% in 2017-18 and 2018-19, respectively.”
From the print edition August 3, 2017