09/01/2008 - 22:00

Exports to lead WA growth

09/01/2008 - 22:00

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The crisis in the US housing market has led to mounting concerns about the global economic outlook, but recent analyses have concluded that Western Australian exporters have little to worry about.

The crisis in the US housing market has led to mounting concerns about the global economic outlook, but recent analyses have concluded that Western Australian exporters have little to worry about.

The Chamber of Commerce and Industry WA’s latest Economic Compass report has concluded that exports are expected to be the key driver of growth in WA in 2007-08.

But the news is not all positive on the trade balance. Strong growth in the local economy has led to a sharp increase in imports, and that trend is expected to continue.

The Department of Treasury and Finance has reached similar conclusions in the economic analysis accompanying its mid-year financial projections statement.

It said that WA’s merchandise exports have grown at a comparatively modest 5.3 per cent per year over the past five years.

The investment in new and expanded resource projects is expected to boost export growth in coming years.

Merchandise export volumes grew by 7.9 per cent in 2006-07, and are tipped to rise by 8 per cent this year and 8.5 per cent next year.

The CCI is more bullish on exports.

“With production capacity on the rise and commodity prices near historically high levels, exports are forecast to make an increasing contribution to the WA economy going forward,” its report said.

It is tipping growth in export volumes to average more than 11 per cent over the next four years. 

On the imports side, CCI is once again predicting much faster growth than Treasury.

Treasury said imports grew by 12.9 per cent in 2006-07, underpinned by both household consumption and business investment.

It has revised up its forecasts for import growth, to 9 per cent in 2007-08 and 6.5 per cent in 2008-09.

By contrast, CCI expects growth in import volumes will average 14.6 per cent over the next four years.

The big difference has not been explained but one factor may be assumptions about the ability of WA industry to supply goods and services to the resources sector.

Many projects have swung increasingly toward offshore procurement, for everything from engineering services to steel fabrication, because of capacity constraints and higher costs locally.

Despite the differences in detail, Treasury and CCI agree that net exports will make a strongly positive contribution to WA’s economic growth over the next few years.

“Net exports are expected to account for around 40 per cent of the growth in output in the WA economy on average over the (four year) forecast period,” CCI says.

 In terms of the global outlook, CCI is sanguine about the sub-prime mortgage crisis in the US.

“Growth in the US economy remains solid and broadly based, with the economy expanding by 2.8 per cent over the year to September,” the CCI report says.

“Notwithstanding concerns over the US economy, prospects for the global economy remain positive, supported by the remarkable growth of the Chinese economy, and a solid outlook for the major economies of Japan and Europe.”

The OECD has forecast that European economies will grow by about 2 per cent in 2008, Japan will continue growing at about 1.6 per, cent while China is forecast to expand by 10.7 per cent.

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