WA’s Economic Outlook

With its resource sector focus, the Western Australian economy continues to grow far more rapidly than the economies of other states and territories. In Western Australia, state final demand (a measure of state-based economic activity that excludes exports) grew by 8.4 per cent during the September 2011 quarter. It was unlikely that such growth could be maintained and this proved to be the case as the economy contracted slightly in the December quarter.

The September quarter growth figure is more than four times the long-term average rate of growth for the State. Such was the scale of growth that the Western Australian economy accounted for 58 per cent of the nation’s total growth over the September 2011 quarter. Even during the GFC, the Western Australian economy maintained strong rates of growth: GSP grew by 4.3 per cent in 2009-10 and 3.5 per cent in 2010-11.

At 4.2 per cent, the unemployment rate in Western Australia is one of the lowest of the country and is proving to very stable. Over the past 12 months, the unemployment rate has consistently remained at around this point – with the peak over this period only reaching 4.5 per cent, which is still below the State’s long term average.

As is to be expected in a tight labour market there has been some upward pressure on wages in recent quarters. Over the 12 months to September 2011, weekly incomes in Western Australia grew by 10.9 per cent. On average, workers in Western Australia are amongst the highest paid in Australia.

The massive scale of private investment in the construction and resources sectors will continue to drive strong economic growth in the short to medium term. The Department of Mines and Petroleum estimates that the value of projects that are “committed or under construction” is $147 billion. Further projects to the value of $160 billion are considered as “planned or possible”. The majority of these projects are linked to iron ore and LNG resources.

A slowing in the rate of work would only serve to sustain high levels of economic growth for a longer period than previously predicted (for most, the main resources sector impetus to economic growth is expected to occur around the 2011-12 and 2012-13 financial years). Under a situation of capacity constraints and a slowing in the rate of work, high economic growth could remain until at least 2015.

Underlying economic conditions in the Western Australian economy are strong and future resource sector activity is expected to support continued employment and output growth. But what makes the outlook for the State economy even more positive is the fact that there exists the necessary policy support to carry the economy through any unforseen difficult periods that may arise in coming years.

Link: Overview