Western Australian economy growing but domestic and external challenges persist

Western Australia is facing challenging global conditions, Parliamentary Secretary to the Premier, Amber-Jade Sanderson MLA, has told an audience in Perth at CEDA’s annual Economic and Political Overview (EPO).

Trade has always underpinned WA’s prosperity and economic development, Ms Sanderson said, from agriculture, to resources and energy.

“Being a trading economy means that WA is always going to be exposed to external forces to a far greater extent than the nation,” she said.

“From volatile commodity prices to coronavirus, these challenging headwinds are frustrating for the government.

“Coronavirus is a difficult issue to face. Both the duration and the scale of the economic impacts may be unknown for some time. It is especially frustrating as it comes during a period when all the indicators are pointing towards a strong economic acceleration for WA.

“Population growth is rising, unemployment is improving, far lower than when we came into government and in January the strongest jobs growth in the country.

“The strongest full year of retail growth, for this financial year the Chamber of Commerce and Industry of Western Australia are predicting the strongest gross state product (GSP) growth in five years, the strongest state final demand (SFD) growth in six years and the lowest unemployment rate in five years.

“The strong financial management of this government means we can handle volatility; getting the budget back to surplus so debt can track down was essential for WA.

“Our commitment to diversifying the economy will help eradicate external shocks to the economy.

“The government has been implementing strategies to expand our industries in tourism, international education, defence industries and future battery industries and manufacturing, often leveraging our expertise from the world leading resources sector, like engineering and automation.”

Ms Sanderson said some policies helping drive this diversification and strength in the economy include the implementation of the Asian Engagement Strategy and targeted stimulus activities such as cutting stamp duty on apartments purchased off the plan and raising the tax-free threshold for pay roll.

The government has also been committed to cutting TAFE fees in half for priority courses and an extra $300 million slated in additional maintenance works for schools and hospitals.

“With Metronet we will see the largest expansion of our metro rail network in our state’s history,” she said.

“This visionary program will create many thousands of jobs over the next few years, not only from construction on the projects and the rail lines, not only from the jobs created from the local content mandated by our WA Jobs Act 2017, but the ongoing work that will come from manufacturing the new generation of rail cars at Bellevue.

“Returning rail manufacturing to the Midland area for the first time since the 1990s, not to mention the social and economic benefits of a significantly improved public transport network for the people of Perth.

“The new normal for growth in WA will not be at peak boom levels, but a key concern is that in that new normal we’re shaping an economy that works for everyone, an economy that generates prosperity and opportunity as broadly as possible for Western Australians.”

Shadow Treasurer, Dean Nalder MLA, said that while GSP is growing, it’s being driven off exports and primarily around the capacity that was built around iron ore and gas.

Mr Nalder echoed sentiments around the need to diversify the WA economy.

“There is a greater need for diversification, and successive governments haven’t really nailed this,” he said.

“We’ve all often talked about it. It doesn’t matter which side of politics you’re on, we talk about broadening the economy and in my view, we fail to really look at the value chain or supply chain of the industries that we wish to engage in.

“Tourism as an opportunity for WA, more often than not successive governments have thrown marketing dollars at that issue and I say that we need to look at the complete value chain and be really clear about what market is it that we’re targeting, who’s the customer, what does that customer want, what experience do they want, what infrastructure is required, who is going to provide it, is it private or state? Then we get to marketing.”

“When we talk about jobs and the economy, our current employment rate of 5.8 per cent is too high - the national average is 5.3 per cent

“The jobs growth that we’re seeing is patchy and directed mostly at part time roles.

“In the last few years over 70 per cent of all jobs created have been part time. There are currently 210,000 under employed or unemployed and that is a growing issue in WA and feeds into that struggling household sector.”

ACIL Allen Consulting Executive Director, WA and NT, John Nicolaou, said while the overall profile of the WA economy has grown there is a disconnect between GSP and employment growth, since the end of the mining boom in 2012.

“In effect what we’ve seen is full time employment, which is fundamental to the health of the domestic economy, has gone backwards. We’ve lost 30,000 full time jobs in this state since 2015 so that is a big brain drain loss for the state and does come with other consequences as well,” he said.

“Without those jobs what it means is we’ve had this lack in the labour market which has seen real wages go nowhere, only up by about 0.3 per cent per annum over the last three years.

“As a consequence of this lack in the labour market we’ve seen 48,000 people leave this state to move to other jurisdictions in the country, a massive loss of talent and skill, and the market impacts domestically are quite profound.

“Overall despite the challenges we face we are heading into an up tempo phase, leveraging what is going on in the resources sector and that gives me comfort to be confident that the next phase of growth is right on our doorstep.

“The state is in a very strong fiscal position now, budget surpluses of a reasonable magnitude are predicted for the state and that has helped reduce debt levels but also it provides the capacity, the opportunity to be a strategic investor where that is needed, particularly if it’s looking to marry up those areas of opportunity that we spoke about earlier with the financial capacity to do that, so that puts us in a very strong position, let’s just hope that doesn’t get whittled away.”

CEDA's 2020 Economic and Political Overview report.

Event presentations

ACIL Allen Consulting Executive Director, John Nicolaou MP3 | PDF

Parliamentary Secretary to the Premier, Amber-Jade Sanderson MLA MP3

Shadow Treasurer, Dean Nalder MLA MP3 | PDF

First moderated discussion - The Economic & Political Outlook for the State MP3

Second moderated discussion - Western Australia’s role on the global stage MP3

Third moderated discussion - In the media: WA’s social voice MP3

Delegate handout PDF