While the US and Eurozone are experiencing severe economic shocks, WA has been booming. However, economic diversity is needed to ensure WA is not overly dependent on China, Bankwest Managing Director, Jon Sutton warned a CEDA audience.
At a CEDA event in Perth, Mr Sutton spoke of the current economic conditions in Europe and the US as well as the drivers of growth in China, WA's reliance on China and the economic imbalances in WA.
On the US, Mr Sutton said that it was in "a fairly benign, sick state" with low growth, high unemployment and high government debt.
"Many years ago we used to say that when America sneezed, the rest of the world caught a cold," he said.
"Unfortunately America has got a long running cold it can't get rid of at the moment
"I actually think the US is in for a long period of very, very low growth."
Mr Sutton said the fragility of the banking system in Europe is: "the one thing that keeps me awake the most."
"People are very scared about what's happening with their banks in Europe and they're actually taking their money out of banks," he said.
"I'm not sure where they're putting it, it's not finding its way to Australia just yet but it must be sitting under a lot of mattresses.
"There's a real risk that if we don't get the structural changes we need in Europe then the euro will fall apart."
"I think if Europe fails, and there's a real possibility that Europe will fail because of the lack of political will, that you'll actually see those raw growth forecasts continue to go even lower."
For Australia, the weakness in US and the Euro will exaggerate our dependence on China Mr Sutton said.
"We need to think about diversifying our economy going forward," he said.
"Our economy is really, really hitched to China going forward, and that's a good thing at the moment.
"But if China had a major hiccup then we would have a major hiccup as well."
He said China has now overtaken Japan as WA's largest exporter, with $51 billion in exports last year, compared to $3 billion a decade ago. In addition to this, in WA there are $85 billion of resource-based projects committed, plus another $95 billion projects under consideration.
On China's economy, Mr Sutton highlighted the shift of China from "from a very much export-led economy to one dominated by investment" and also the urbanisation of the middle class. Since 2008, 120 million rural workers have been urbanised, with potentially another 100 million over the next few years.
He said this should result in ongoing demand for resources from WA as the Chinese population continues to urbanise.
"The numbers are quite staggering and daunting but, again, that tells me that the Chinese economy, if we have a significant dip in world growth, has got its domestic settings right, and the big macro settings right, to continue to grow.
"All of these trends are particularly good for the Western Australian economy."
However, Mr Sutton did site a few challenges for WA moving forward including tackling the skills shortage. He said the skilled migration laws needed attention as well as education and training to ensure WA has a skilled workforce to meet demand and complete projects on time.
"All in all we're in for a wonderful period of growth but there's going to be some bumps along the way and (we) need to be mindful of those bumps and planning for those bumps."
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