STATE OF THE STATES REPORT: WESTERN AUSTRALIA (WA) ECONOMY BOUNCING BACK TO HEALTH

Western Australia economy bouncing back to health after end of resources boom

WA’s economy is bouncing back to health, with a resurgent mining and resources sector driving the State to one of the strongest growth rates in the country. CommSec, in its latest State of the States report to be released today, said WA’s economy grew at an annual rate of 6.7 per cent in the three months to September 30, second only to Tasmania with 6.9 per cent. Exports led the way courtesy of strong demand and prices for commodities such as WA iron ore and liquefied natural gas (LNG).

The report found that while WA continues to perform poorly compared with its 10-year average or “normal rate”, key measures are pointing in the right direction. It said equipment spending in WA was growing at 17.5 per cent on an annualised basis as businesses felt confident enough to start investing again. Crucially, equipment spending was also fuelled by farmers seeking to capitalise on good growing conditions last year at a time of high prices and drought in the Eastern States.

The bank also noted that WA’s population was growing at its fastest rate in almost three years, albeit at a lower-than-average 0.84 per cent, while real wages and employment were also creeping ahead. Craig James, CommSec’s chief economist, said there was “light at the end of the tunnel” for WA after a tough period following the mining boom. Mr James said the State was returning towards normal levels of economic activity and the cycle of growth may last for another five to 10 years. “There are seeds being sown but you’re not there yet,” he said. “You have population growth, real wage gains, a degree of flattening out in terms of the job market — a number of those things start to impact.”

Treasurer Ben Wyatt said the results were encouraging and consistent with the State’s figures that showed strengthening business confidence. “The State of the States report’s method of comparing the states current economic performance to its performance over the past 10 years will always throw up a poor result for Western Australia, as it compares our current economic performance to our performance during the recent once-in-a-century resources boom,” Mr Wyatt said. “What is clear from this report and a myriad of economic data available is that the WA economy is improving. Business and consumer confidence are the highest they have been in years, overall employment is growing steadily, and the domestic economy is growing for the first time in five years. Of course, we would like to see the economy in a stronger state, but all the signs are showing that our government’s plan for economic recovering is working.”

WesTrac boss Jarvas Croome, pictured, said purchases of heavy equipment from trucks to bulldozers had been steadily improving, led by the construction of replacement iron ore mines and new lithium projects. Mr Croome said equipment spending was also broader based than during the resources boom but things were only getting back to normal. “There is activity, and that’s positive,” he said. “But the activity is not at levels it was a few years ago — it’s just the activity you’d expect to see in a normal cycle. It feels a lot better because we’ve come off such a low base but really we’re only getting back to normal activity levels in many respects. The nice thing about it is it’s coming across all sectors. You’re seeing it in lithium, you’re seeing it in mineral sands, you’re seeing some of those older mines coming back into operation, so it is quite broad in terms of the customer base that’s buying it. Equally for those who are not purchasing new gear, we continue to see strong demand on parts and service as they rebuild equipment and extend its life.”

Source: PerthNow, Published on January 29, 2019