The WA Economic Outlook is a summary of the Deloitte Access Economics Business Outlook publication with a specific focus on the Western Australian economy.
WA Economic Outlook - December 2018
Since our August outlook, the WA economy has continued down the path of slow and steady recovery to officially emerge from recession. But the risks posed by a turbulent global economy have only increased:
Trade tensions between China and the US have intensified, with tit-for-tat tariff exchanges threatening both countries’ GDP growth in 2019. While the current 90 day détente is welcome, the longer term path to resolution is unclear.
The US Federal Reserve has continued its monetary tightening campaign, raising the prospect of higher interest rates across other advanced economies – but the RBA looks set to continue its ‘no change’ approach, as Australian inflation fell short of the target for the 11th consecutive quarter.
Western Australia’s gross state product (GSP) grew by 1.9% in 2017-18, reversing a decline of 1.8% in 2016-17. Growth was reinforced by slightly higher household spending and an end to the decline in business investment.
But the State is still heavily dependent on the external sector – net international exports were the largest contributor to growth, with mineral and petroleum commodities accounting for 90% of WA’s exports by value
Growth in commodity exports has been underpinned by higher iron ore prices, as China’s steel mills hit record levels of production despite ongoing environmental concern; and ramped up production from the LNG megaprojects in the north west.
There are signs that population growth has turned a corner in WA, with net overseas migration growing by 14% in the year to March 2018, and a slowing in the net outflow of interstate migrants. If population growth follows the most recent ABS ‘medium’ projection, WA could absorb the population equivalent of both South Australia and the ACT combined in the next 50 years.
There is still significant slack in the WA labour market, despite strong jobs growth in the year to October and an increasing share of WA workers in full time employment. There were recent positive movements in both the unemployment rate and rate of wage growth, although on both indicators WA is still lagging behind the national averages. In the long term, WA’s labour market faces more existential challenges as technology reshapes the world of work.
While the outlook for WA is broadly positive, now is not the time to be complacent. As we outline in our project A new WAy, the State has a unique opportunity to take advantage of shifting sands in the global economy, but only if it discards the ‘business as usual’ approach and invests in genuine areas of economic development.