Western Australia’s peak business group has forecast an easing in economic growth in Western Australia in the current financial year to 4.5 per cent, a decline from five per cent previously tipped.
CCI’s forecast for 2014‑15 is also marginally lower at 4.5 per cent.
The downgrade comes as business investment declined at a faster rate than expected, falling by 6.5 per cent in the last three months of 2014, according to CCI’s latest quarterly outlook.
CCI chief economist John Nicolaou explained that “with the resources sector winding back investment spending, this is having a measurable impact on the rate of growth in the WA economy”.
“Business investment is now at its lowest level since December 2011, indicating that the ‘peak’ in activity has now passed.”
With jobs growth not expected to pick up by the end of 2014, CCI expects the unemployment rate to remain around five per cent this financial year then fall in 2014-15 to 4.75 per cent.
Despite this downward revision, the WA outlook remains strong as other sectors of the economy play a greater role in driving growth in the state.
WA’s housing sector has shown a positive outlook with an expected dwelling investment rise of 13 per cent in 2013-14.
Stronger levels of activity and better buying conditions have helped stimulate dwelling approvals and construction.
Export volumes are also expected to grow by nine per cent in 2013-14, and a further eight per cent in 2014-15 thanks to capacity expansions in the resources sector in recent years.
However growth in consumer spending is down from 7.8 per cent in 2012 to just 0.8 per cent in 2013, with households being more cautious.
This presents a risk to the housing market as potential buyers evaluate future investment plans.
“WA’s economy was always going to moderate following such a significant and long term investment boom,” Mr Nicolaou concluded.
“However WA’s economy remains very positive and the pick-up in other sectors of the economy will ensure that the impact of the scaling back in the resources sector will be modest by historic standards.”