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Recovery timing uncertain

AFTER WA’s December quarter economic slump, experts agree the recovery is coming. They just cannot agree on when.

A cessation of exceptionally high business investment, mostly related to large resources projects, is blamed for the downturn.

At a recent Curtin Business School Business Forum, Univer-sity of Melbourne Institute of Applied Economic and Social Research director Peter Dawkins, WA Department of Treasury director of economic policy Tim Marney and Chamber of Com-merce and Industry of WA senior economist Nicky Cusworth gave their views on WA’s future.

The three tip economic growth rates for WA in 1999-2000 ranging from 2.5 per cent to 7.5 per cent.

Professor Dawkins, who predicted a year-ended growth of 7.5 per cent for the second and third quarters of 1999-2000, said the economy was already growing solidly.

He said state final demand was picking up but the unemployment rate was forecast to rise from below the national average to just above it.

Professor Dawkins predicted national inflation could rise to four per cent by December 2000.

Mr Marney said the March quarter results were at odds with the picture of an economic slowdown but did not believe the economy was in recovery. He feels, however, that growth of up to four per cent is not far away.

“Two key determinants on recovery are the international situation and how that flows on to business investment,” Mr Marney said. “Korea is looking good and there are early good signs from Japan, but I would like to see some more runs on the board there.”

Ms Cusworth said the three tipped growth rates of 2.5 per cent, four per cent and 7.5 per cent were equally plausible.

“It shows the effect changes in business can have on a small, investment-driven economy such as WA’s,” she said.

Ms Cusworth expects the recovery in the middle of next year. She said some sectors seemed unaffected by the slowdown.

“There are reports of the housing market facing overheating. I’ve heard reports of long order books and skill shortages,” Ms Cusworth said. “Private consumption is strong and retail sales are good.”

Ms Cusworth said the $64 billion question was what was happening to mining investment?

“There are a lot of mining projects still out there but a lot fewer projects committed or under construction,” she said.

“Even on the CCI’s pessimistic view, there are $10 billion worth of projects likely to get the green light in the next six months.”

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