15/04/2009 - 10:40

CCIWA tips economy to contract in 2010

15/04/2009 - 10:40

Bookmark

Save articles for future reference.

The Chamber of Commerce and Industry WA has dramatically revised down its forecasts for the state on the back of the global financial crisis, tipping the economy to contract by one per cent in the 2010 financial year.

CCIWA tips economy to contract in 2010

The Chamber of Commerce and Industry WA has dramatically revised down its forecasts for the state on the back of the global financial crisis, tipping the economy to contract by one per cent in the 2010 financial year.

The new forecast is part of CCIWA's quarterly snapshot of the WA, national and international economies released today.

The business organisation said although WA remained one of the world's few economies to experience growth this financial year, a weaker exports market and ongoing economic uncertainty has prompted a revision of its forecasts.

CCIWA expects state economic growth to ease further in the current financial year, down from a previously revised 3.5 per cent to 2 per cent.

"It is likely that economic conditions will deteriorate further the following year as the global recession further impacts the State's key commodities," CCIWA chief economist John Nicolau said.

"The result is that the WA economy is likely to contract by around one per cent in 2009-10."

It will be the first period of negative growth since the beginning of the decade, Mr Nicolau added.

In December last year, CCIWA had slashed its fiscal 2010 forecast from 6.25 per cent to 3.25 per cent.

Despite the negative growth tipped for WA in 2010, CCIWA expects the state economy to make a strong recovery the following year, forecasting growth to reach 5 per cent in 2010-11 and then 6 per cent the following year.

Mr Nicolau said the recovery was on the back of record business investment in recent years, with the state receiving $10.8 billion in investments in the December quarter of 2008.

CCIWA has also projected the state's unemployment rate to peak at 5.5 per cent during the 2010 financial year. The current jobless rate for WA stands at 4.9 per cent.

"While the labour market in WA remains firm, signs are starting to emerge that the global financial crisis, and weaker economic conditions, are resulting in slower jobs growth," Mr Nicolau said.

"While jobs continued to be created in the WA economy every month, this is being offset by more people entering or re-entering the workforce, bringing with it an increase in the unemployment rate during 2008-09."

The participation rate has climbed from 69 per cent in February to 69.4 per cent in March, according to latest figures from the Australian Bureau of Statistics.

 

 

The announcement is below:

 

Although the global financial crisis has in a matter of months significantly eroded local economic conditions, there are clear signs the Western Australian business sector continues to insulate the rest of the economy from the worst of the slowdown.

The State's peak business organisation, the Chamber of Commerce and Industry of Western Australia, has today released its quarterly snapshot of the local, national and international economies, which shows although WA is being hard hit by the global economic slowdown, the local economy continues to grow, albeit moderately.

The CCI report finds that the Western Australian economy continued to grow strongly in the final months of 2008, even as global trade and investment froze as a consequence of the global financial crisis.
Business investment continued to be the driver of growth and development in the State, with a record $10.8 billion invested by WA business during the last quarter of 2008.

Business investment provided an important buffer for the domestic economy in recent times, with consumer spending and housing investment falling during the quarter. At the same time, household savings have risen to levels not seen since the 1980s, highlighting the cautious nature of households in the face of heightened uncertainty.

Although the WA economy remains one of the world's few economies to experience growth this financial year, a weaker exports market, and ongoing uncertainty about short term prospects for the global economy, has prompted CCI to revise its economic growth forecasts for this financial year, and the next.

Economic growth in WA is now expected to ease further in 2008-09 - down from 3.5 to 2 per cent.

It is likely that economic conditions will deteriorate further the following year as the global recession further impacts the State's key export commodities. The result is that the WA economy is now expected to contract by around one per cent in 2009-10.

Although the WA economy is now likely to record negative growth for the first time since the beginning of the decade, it comes on the back of a period of exceptional growth that allowed the WA economy to double in size and diversify its economic base.

Labour market conditions are also expected to remain firm with the unemployment rate tipped to peak at 5½ per cent during 2009-10.

Record investment that has been undertaken throughout the economy in recent years will also help ensure that WA is well placed to mount a strong economic recovery by the start of the next decade, with growth reaching nearly 5 per cent in 2010-11 and 6 per cent the following year.

While the labour market in WA remains firm, signs are starting to emerge that the global financial crisis, and weaker economic conditions, are resulting in slower jobs growth. While jobs continue to be created in the WA economy every month, this is being offset by more people entering or re-entering the workforce, bringing with it an increase in the unemployment rate during 2008-09.

While WA business continues to prop-up the local economy, business confidence has fallen to record levels in recent quarters as global economic uncertainty impacts on future plans.

Economic conditions have deteriorated, and at a much faster pace, across the rest of the country, highlighted by Australia's first quarter of negative growth in eight years in December. More recent indicators suggest that the national economy is likely to have contracted further during the March quarter.

The prospects for the WA and national economies reflect the coordinated nature of the global economic downturn, which has seen the US, European and Japanese economies simultaneously fall into a deep recession, as well as key trading partners across Asia. The prospects for an early recovery are also looking less likely, with forward indicators of industrial production exhibiting record falls in recent months.

Even China's once unstoppable growth has come back in recent quarters as trade flows eased. This is likely to see economic growth in China slow to just under 7 per cent in 2009 - the lowest rate of growth since 2001.

While it is likely that global economic conditions will remain weak over the remainder of the year, encouraging signs are emerging that financial stability is improving, assisted by coordinated efforts by central banks around the world to cut interest rates, increase liquidity and support key financial institutions. This is an important precondition to a global economic recovery.

 

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options