Export reliance a major factor in economic outlook

RESILENT domestic demand, particularly in residential building activity, should help WA post stronger growth during the next year, despite an increasingly gloomy international outlook.

Speaking at a Chamber of Commerce and Industry of WA luncheon on how recent international events would affect WA, chief economist Nicky Cusworth said the economies of Europe, Japan and the United States looked set to go into a recession simultaneously – the first time since the 1970s.

“Even before the events of September, world economic growth prospects were deteriorating,” she said.

“Japan seems to be heading back into recession. The USA’s economy grew by just 0.1 per cent in the June quarter, while European industrial production fell in the first half of 2001. It seems possible that Europe, the USA and Japan could be headed into simultaneous recession for the first time since the-mid 1970s.”

Ms Cusworth said WA was expected to be more vulnerable to international demand because of its high reliance on exports.

“Slower world growth will affect both demand volume and prices of Australia’s exports, and WA will feel these effects more acutely than other States because of its relative export reliance,” Ms Cusworth told the luncheon.

The international events have led CCIWA to revise downward its WA growth forecasts to 2 per cent for the year 2001-02 – well below the 5.5 per cent forecast given by the Chamber in its previous economic review.

Speaking at a Chamber of Minerals and Energy economic briefing earlier this week, ANZ Bank chief economist Saul Eslake said WA was better placed than many of the other States to ward off the influence of a global recession for the next year.

Mr Eslake believes the upturn in the housing sector would be maintained until 2002-03, even when the first home buyers’ grant was no longer bolstering housing demand.

“The WA economy will achieve 4 per cent growth by the 2002-3 financial year, bolstered by an upturn in the housing sector, which is unlikely to be derailed before then, and major industry projects such as the North West Shelf venture expansion,” he said.

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