Commodities key to WA recovery

Strong demand for iron ore will ensure WA makes a solid recovery in the aftermath of COVID-19, according to new research from Deloitte Access Economics.

That comes as Australia’s overall recovery has stalled, with Victoria forced to impose increasingly stringent restrictions after recording 127 new infections overnight, with numerous instances of community transmission.

By comparison, WA recorded just two new infections overnight, bringing the state’s total active cases to 12 with all cases confined to hotel quarantine.

Deloitte Access Economics’ chief economist Chris Richardson said that, while no state had been left unscathed by the economic fallout caused by the virus, Victoria was likely to be the worst affected due to recent outbreaks of the virus.

By comparison, ACT and Northern Territory were likely to recover the fastest, in part due to their reliance on what Mr Richardson dubbed recession proof sectors, such as the public sector.

Conversely, states with a greater reliance on entertainment, retail and construction, which were deemed largely to be growth dependent, were viewed as likely to suffer the most in coming years.

“The good news is that many of the hardest hit [sectors] are increasingly opening up,” he said.

“But international borders remain closed.

“And the usual sectoral victims in a recession will be weakening further even as other sectors begin a path to recovery.”

Mr Richardson said stable commodity prices overall had ensured Australia’s economy remained buoyant, citing demand for iron ore in WA as supporting the state’s economic growth and overall financial position going forward.

He argued though that the country’s overall recovery would depend on the federal government maintaining support for affected industries through targeted wage subsidy schemes, particularly given historically low interest rates meant the Reserve Bank of Australia had limited room in which to act.

Currently, the federal government’s JobKeeper and JobSeeker payments are set to expire in September.

Prime Minister Scott Morrison has so far made no commitments to extend the payments past that date.

Mr Richardson said the discussion around repaying debt accrued in the recovery period, as well as talks of raising taxes and cutting spending, was immaterial to current concerns.

“Every taxpayer dollar is precious,” he said.

“But every taxpayer dollar is also helping Australians more effectively than it has ever done.

“Our fight against the virus cost 835,000 people their jobs and many thousands of small business people a lifetime of work.

“That risks leaving generational damage.

“We owe it to them to get livelihoods back as fast as we can.”