Sunday 18th Nov, 2018

SPECIAL REPORT: Western Australia


A SANDGROPER economist believes his state is poised to recover from the downturn that followed the end of the mining boom.

The correction that followed the dip in iron ore prices hit the state’s finances hard and arguably contributed to the fall of the Colin Barnett-led coalition government in the 2017 election.

But while not ignoring the state’s issues, Professor Peter Robertson from the University of Western Australia believes there is also cause for optimism, given time.

He notes the migration that occurred into the state during the mining boom and how many of those people have moved on, while unemployment has also increased among the locals.

“So there is a bit of adjustment. There is a bit of concern around the state government sector and trying to tighten up on fiscal spending at the same time as the boom has come off,” Professor Robertson explains.”

There also have been public service lay-offs at a time when the economy is vulnerable.

“So that is a bit of a concern. That has been driven by the GST revenue structure, where state finances are not what you might expect after a boom,” he says.

“The state-federal policy mix around GST is potentially going to contribute to making cycles worse rather than smooth them out.”

An intriguing aside will be negotiati with the Commonwealth, as the new state Labor government seeks to get a better deal regarding GST revenue compared with Colin Barnett’s administration.

“We need to be aware of the economic damage if the state was forced to contract at a time when the economy has already been under quite a heavy contraction,” Professor Robertson says.

“Ideally you want the government spending to be counter-cyclical rather than in the same cycle.”

But Professor Robertson says the opportunities in WA are there.

“Commodity prices (particularly iron ore) have been rising again and a lot of the big (resources) companies are doing well.

“The structure of revenues has changed from wages to profits and there is now a lot of machinery exporting a lot of minerals without as much construction,” he says.

“Prices are good enough for those companies to make healthy profits.”

While the exchange rate has risen of late it is still comparatively low compared with a few years ago, presenting opportunities for some sectors such as agriculture, tourism and education.

Infrastructure such as a new stadium have also helped create a city in Perth that is attractive to visit and live.

“Perth has been able to leverage a lot of the resources boom into city infrastructure which makes it a much more popular destination for people to live, for tourists and for students.

“A lot of the railways are quite new here compared with other cities,” he notes.

At the same time, WA faces disparity between Perth and the regions.

“Across the country there is growing disparity between regions and cities.

“This is something of a feature of all modern industrialised economies,” he says.

“There are definitely recession regions just as there are right around the country.”

But overall, he believes there is cause for optimism.

“Definitely. There is tourism, agriculture and all the resources – it is a good balance,” he says.

“I think Western Australia has done well actually.”

From the print edition August 3, 2017

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