Deloitte Access Economics has foreshadowed a bleaker outlook for the state’s economy in the coming year than that predicted by the WA Department of Treasury in December.
Deloitte Access Economics has foreshadowed a bleaker outlook for the state’s economy in the coming year than that predicted by the WA Department of Treasury in December.
Western Australia’s Gross State Product is expected to rise by 0.9 per cent in 2016-17 and only 0.2 per cent in 2017-18, according to Deloitte's WA Economic Outlook report.
That compares with the Barnett government’s mid-year revision in December, which foreshadowed a 1 per cent GSP increase in 2016-17 and a 2.25 per cent rise in 2017-18.
“Stripping away the impact of net exports, brought about by higher commodity prices, lays bare the challenges facing Western Australia,” Deloitte partner Matt Judkins said.
Deloitte estimated the state’s domestic economy – measured as State Final Demand – is expected to shrink by 7.4 per cent this financial year and contract a further 1.2 per cent in 2017-18, before returning to growth in the following fiscal year.
The figures are similar to the state government’s December predictions of a 6 per cent decline for 2016-17 and a 1.75 decline in 2017-18, before returning to growth of 2.25 per cent in 2018-19.
Deloitte told Business News that, while its report had access to an additional five months worth of data than was available to the government last December, there were several factors that contributed to the variance in GSP outlook for the coming fiscal year.
The largest of those factors was an expected 10.5 per cent fall in dwelling investment, as opposed to Treasury’s forecasted 1.5 per cent increase, while net exports and business investment was also met with a harsher outlook by Deloitte than the state.
“The eventual return to growth is underpinned by stronger private consumption as low interest rates, slightly higher wages growth and subdued consumer prices stoke moderate spending growth,” Mr Judkins said.
“However, we don’t expect business investment to grow in year-on-year terms until the middle of the next decade.
“If this eventuates, it would signal a lost decade of investment for the state.
“Indeed, the value of Western Australian business investment in the mid-2020s would return to 2005-06 levels in real terms if this occurred.”
Deloitte WA managing partner Michael McNulty said the local resources sector could be the state’s ticket to achieving greater diversification between the services and non-services sectors by leveraging what the state was already good at to build new industries and forge new markets.
“An opportunity exists to leverage the knowledge of the resources sector to build the state’s capacity for science, technology and innovation,” he said.
“Western Australia’s resources sector is nationally renowned as an avid investor in, and applicant of R&D, particularly in digital. Think driverless mining trucks and autonomous drill rigs in the Pilbara.”
Mr McNulty aso said there was no doubt that digital technology would play a bigger part in the economic future than it had to-date.
“It’s time to think hard about that future and how we can shape our digital destiny to get a bigger slice of the opportunities it presents,” he said.
