24/07/2013 - 07:06

Growth forecasts down as investment peaks

24/07/2013 - 07:06

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The state’s leading industry body has revised down its growth forecasts for the Western Australian economy as investment in the resources sector reaches its peak.

The Chamber of Commerce and Industry WA’s latest quarterly outlook predicts the state’s economic growth will ease from just over 6 per cent in 2012-13 to 5.75 per cent in 2013-14 and 4.75 per cent in 2014-15.

CCI had forecast growth of 6.5 per cent for both 2012-13 and 2013-14 when it released its previous outlook in April.

Business investment is expected to slow to 5 per cent in 2013-14 and to remain steady in 2014-15, having risen by 10 per cent in 2012-13.

“WA continues to boast a strong investment pipeline but as many of the current projects move into the final stages of construction, we expect investment will begin to return to a more ‘normal’ level than what we have experienced in recent years,” CCI chief economist John Nicolaou said.

Mr Nicolaou said he expected the slowdown in investment would encourage all sectors of the economy to contribute to growth in the coming years.

Exports are tipped to grow by 9 per cent in 2013-14 and 8 per cent in 2014-15 as the mining sector ramps up production.

Labour market conditions are expected to remain tight, with CCI predicting the unemployment rate will average 4.5 per cent over the next two financial years.

However, Mr Nicolaou said he expected households to play a key role in driving growth in the local economy.

“The fundamentals of our economy remain strong,” he said.

“We have an environment of low interest rates, increasing incomes, strong population growth and low unemployment.

“This is already providing the conditions for stronger activity across other sectors of the economy, which will set us on a more sustainable growth over the longer term.”

CCI’s bullish growth projections earlier in the year prompted Treasurer Troy Buswell to laud the WA economy’s performance as “head and shoulders above other states”.

Mr Buswell has since acknowledged the government is experiencing structural budget problems and a “significant erosion” of the state’s revenue base on the back of a weaker than expected royalty take and population-related spending pressures, hinting at the prospect of a deficit when the state budget is handed down in the coming weeks.

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