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Medium-term hit from credit crunch

THE state’s economy could yet feel the impact of the global financial crisis, which has already lifted the cost of borrowing and could make it increasingly difficult to access finance. According to the CCIWA, these increased costs and difficulties are likely to affect the investment decisions of WA businesses, particularly for small and medium-sized enterprises. In its latest economic outlook, the CCI said although weaker growth was likely across much of the developed world, growth in WA was expected to be buoyed by the Chinese economy, which expanded by 10.4 per cent over the year to June 2008. As a result, it is forecasting the WA economy to grow by 5.5 per cent in 2008-09 and 6.25 per cent thereafter. According to the Department of Treasury and Finance’s latest economic outlook, recent turmoil in global financial markets could have a detrimental effect on WA business conditions over the medium term. With the developing and newly industrial economies of South and East Asia so far holding up well in the face of the turmoil, a slowdown in China could have far-reaching impacts on the WA economy. The Australia stock market, like other global markets, has been battered by the global financial crisis, with the All Ordinaries index closing at 4,013 points on October 16. The index is 41 per cent lower than its early November 2007 peak. Financial markets around the world had collectively lost more than $US25 trillion since the market high point in late 2007. The Australian dollar has also fallen drastically to close at US66.5cents on October 16, down from its 25-year high of US98.49 cents recorded on July 16. Another event likely to impact on the state’s key economic indicators is the gas crisis, caused by the explosion at Apache Energy’s Varanus island gas processing plant in early June. The explosion disrupted the state’s domestic gas supply and had significant consequences for some businesses. However, it is too soon for these effects to be fully reflected in economic indicators such as employment, inflation and output, the DTF said. Sectors significantly affected by the gas shortage include mining, manufacturing, food production and hospitality

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