11/12/2017 - 15:28

Deloitte calls economic turnaround

11/12/2017 - 15:28

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Western Australia’s economy is one year away from a return to normality, according to consultancy firm Deloitte Access Economics, with consumer confidence, exports and dwelling approvals data all pointing towards an upswing.

Growing consumer confidence is one sign that brighter days are ahead for the state.

Western Australia’s economy is one year away from a return to normality, according to consultancy firm Deloitte Access Economics, with consumer confidence, exports and dwelling approvals data all pointing towards an upswing.

In its economic outlook produced today, Deloitte predicted both gross state product and state final demand, which measures the economy without trade, would grow in 2018.

That follows a record fall in SFD of more than 7 per cent in the 2017 financial year, and the first contraction of GSP in more than a quarter of a century (down 2.7 per cent).

But it won’t mean a return of the big growth during the mining boom years, Deloitte warned.

“The ‘normal’ we envisage is not the investment-fuelled highs of pre-2012, but rather something slower and more sustainable,” the report said.

“We expect GSP to rise by 1.7 per cent in 2018, followed by growth of 2.3 per cent in 2019 and 3 per cent in 2020.

"This compares to a 4.6 per cent long-term average rate of economic growth.”

SFD would grow by about 0.1 per cent next year and 3 per cent in 2019.

There were numerous data points indicating an uptick, Deloitte said.

One was consumer confidence, which reached a three-year high in the September quarter in data released by the Chamber of Commerce and Industry of WA.

“A more positive jobs market explains this boost in confidence,” Deloitte said.

“The Australian Bureau of Statistics measure of job vacancies in WA has increased for five consecutive quarters to August 2017 (up 3,800 vacancies) - a feat not achieved since early 2006.

“Higher vacancies are showing up in lower unemployment data, with the trend unemployment rate in WA falling from 6.4 per cent last October to 5.8 per cent this October.

“The state’s workforce has expanded for 13 consecutive months to October 2017, with over 37,000 jobs added in the year to October.”

A stronger labour market will boost wages, with Deloitte forecasting growth of 1.8 per cent in 2018 and 2.9 per cent in 2019.

Exports grew by more than 7 per cent in the past financial year, Deloitte said, meaning the state’s share of national exports remained around 40 per cent.

That has driven a significant boost for miners, with pre-tax profits more than doubling in the past year, while non-mining profits were up about 25 per cent.

The construction industry also had cause for optimism.

“Approvals to build dwellings in WA have risen for six consecutive months to October 2017, which will give hope to the residential construction sector,” Deloitte said.

“Signs are emerging that (housing) demand is stabilising in WA.

“Finance approvals for all owner-occupier housing have risen for five consecutive months to September 2017, ending a record 41-month run of consecutive decreases in approvals to April 2017.”

Despite the many reasons for optimism, Deloitte said a lift in retail spending and continued momentum behind full time jobs growth would be critical for a recovery to take shape.

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