28/05/2020 - 14:31

More pain ahead for WA

28/05/2020 - 14:31

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A 3.1 per cent contraction of Western Australia’s economy is anticipated in the 2021 financial year, following a 5 per cent fall in the current quarter, but Treasurer Ben Wyatt is more optimistic about the pace of recovery than he was two months ago.

Ben Wyatt says the June quarter impact of the pandemic will be significant. Photo: Attila Csaszar

A 3.1 per cent contraction of Western Australia’s economy is anticipated in the 2021 financial year, following a 5 per cent fall in the current quarter, but Treasurer Ben Wyatt is more optimistic about the pace of recovery than he was two months ago.

Mr Wyatt said the brunt of the impact was in the June quarter, with economic activity to fall by about $4 billion in that period.

Those Treasury numbers are better than the Reserve Bank of Australia’s forecasts, however, which in April predicted national output would drop 10 per cent in the six months to June 2020.

In the year ahead, Mr Wyatt said WA would be affected by the global circumstances, such as tourism inflows and terms of trade changes.

He said it was likely the economy would rebound in the year after that, however.

“We haven't seen a fall with such speed, having that (5 per cent) contraction in one quarter is extraordinary,” Mr Wyatt said.

“I'm optimistic about where the economy is going.

“We’re seeing the worst figures anyone has seen in their lifetime.

“But where we were two months ago compared to where we are now, I'm much more optimistic.”

He said the federal government’s JobKeeper program had supported the economy, as had the decision to keep the mining industry operating.

Moving forward, there would be some benefit from people returning to work and movement as social distancing restrictions eased, although not enough to counteract all of the international impact, Mr Wyatt said.

He said a deficit in the 2021 financial year was not inevitable and he was still expecting a surplus for the 2019-20 year.

“We still don’t know what the revenue hit is going to be next year,” Mr Wyatt said.

Revenue projections show a fall of about $1.8 billion across this year and next, he said, although that was highly uncertain.

Support measures similarly totalled about $1.8 billion.

“Our economic recovery plan is under way,” Mr Wyatt said. 

“Restrictions are being progressively eased in accordance with the expert health advice that will allow businesses to reopen and people to safely get back to work.

“Infrastructure spending will be ramped up to help restore the economy to its growth trajectory as soon as possible, and reforms to cut red tape will also be made that will strengthen our economy in both the short and longer term.”

Shadow treasurer Dean Nalder said expense growth had been high before the virus hit, while business investment was declining and mortgage stress was very high.

“The government have been relying on the windfall gains from the federal government’s fix of the GST and high iron ore prices to paint the picture of successful financial management, yet they haven’t developed a plan on how they are going to deliver jobs growth and job security for West Australians to sustain future budget surpluses,” he said.

“The premier must shift his focus to delivering an economic plan while still keeping WA safe from COVID-19.

“At the moment Mr McGowan is not addressing WA’s jobs crisis. 

“Last month, 62,000 WA people lost their job, and we now have more than 200,000 underemployed.

“The WA Labor government needs to announce a jobs plan – and how (the government) will deliver it - now.”

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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