29/11/2017 - 15:58

Boom-bust economy a myth: report

29/11/2017 - 15:58

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A new report has challenged the accepted wisdom that Western Australia has a boom-bust economy that rises and falls on the back of the resources sector.

Boom-bust economy a myth: report
Marion Fulker says there are few signs to show that the economy of Greater Perth is one that teeters from boom to bust.

A new report has challenged the accepted wisdom that Western Australia has a boom-bust economy that rises and falls on the back of the resources sector.

The report by the Committee for Perth concluded the local economy was less volatile and more resilient than the Australian economy.

“Taking a long-term view, there are few signs to show that the Greater Perth economy is one that teeters from boom to bust,” chief executive Marion Fulker said.

“What the research found is that when you compare WA’s gross state product, unemployment rate and housing price volatility with the rest of the country, we outperformed them.

“It was only on inflation that WA measured poorly against Australia.”

The report’s findings are at odds with the widely held view that WA has a volatile economy fuelled by wide swings in business investment.

A prime example was the massive surge in business investment in the decade to 2012, driven by massive gas projects such as Gorgon and Wheatstone, and the rapid expansion of the Pilbara iron ore industry.

This flowed through to big spikes in property prices, population growth and government revenue - all of whch have subsequently reversed.

Despite its provocative conclusion, the report acknowledged that the extractive industries are key to the local economy’s performance.

“The industries which underpin the current post-boom economy are still the mineral and energy resources and agriculture businesses, which are the foundation of the Greater Perth economy,” the report stated.

Its key findings included that, between 1991 and 2016, WA increased its gross state product every year, and in 20 of the 26 years, WA outperformed Australia.

While Australia experienced three years of negative GDP growth per capita during this period, in 1991, 1992 and 2009, WA had only two years of negative growth per capita, in 1991 and 2009.

The report found WA’s unemployment rate tends to be lower than Australia’s.

This was based on the finding that WA had a lower unemployment rate in 76 per cent of the 474 months between February 1978 and July 2017.

It also concluded that property prices in Perth have been less volatile than in Sydney and Melbourne between March 2002 and June 2017.

“What this report does is not only challenge the boom-bust narrative, but points to a Greater Perth economy that has remained resilient in the face of considerable external pressures,” Ms Fulker said.

“This report provides the evidence behind why the Perth economy has been a success, and with the right policy settings will continue to do so into the future.”

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