28/04/2009 - 06:44

Recession laps WA shores

28/04/2009 - 06:44

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The state's economy is tipped to fall into recession in fiscal 2011 however Access Economics has forecast a "slow slowdown" as spending on big projects such as the $12 billion Pluto project offsets a dramatic downturn.

The state's economy is tipped to fall into recession in fiscal 2011 however Access Economics has forecast a "slow slowdown" as spending on big projects such as the $12 billion Pluto project offsets a dramatic downturn.

In its March 2009 Business Outlook report, Access Economics said construction spending will be the key recession driver with private commercial construction spending forecast to halve from today's $21.4 million to $10.9 million in 2010/11.

"That process has already begun, with projects getting cancelled or delayed every day," the economic forecaster said.

"And house prices are falling as well, particularly at the top end and, while rental vacancy rates are still low, they are rising and they are rather higher than seen in most other State capitals."

Engineering construction activity is forecast to remain strong for some time yet with the pipeline of work set to underwrite construction spending through the 2010 financial year.

However, Access said activity in the sector may fall away after fiscal 2010 as lower commodity prices discourage new investment spending.

Meantime, Access said the substantial spend on the Pluto liquefied natural gas project and other such projects will prevent the state from entering a dramatic downturn however it remains cautious as shutdowns and output cutbacks gather pace.

Access has forecast WA's jobless rate to hit 5.8 per cent in 2009/10 and reach a high of 7.2 per cent in 2011/12.

Nationally, Access said it is optimistic Australia will have a small recession compared to its peers given the good health of the banks, the stimulus packages and the fall in the Australian dollar amongst other things.

"But Australia had a bigger boom and a bigger bubble than much of the world: the increase in profits here was rather bigger as a share of our economy than elsewhere, while house prices are a bigger multiple of our wages than in comparable nations," Access said.

The forecaster has tipped around $40 billion a year will be stripped from the national income as a result of sharply lower commodity prices.

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