Reports signal hope for WA economy

Western Australia's economy has been performing well below its long-term average but is showing signs of increasing economic momentum with growing exports and $73 billion of projects underway or under consideration, according to two new reports.

CommSec’s State of the States and Deloitte Access Economics' Investment Monitor, both published this week, showed how the WA economy was fairing in comparison to other states.

WA ranked in the bottom three states and territories for all eight of the economic rankings in CommSec’s report and seventh overall, only in front of the Northern Territory.

Construction work in the December quarter was 42.7 per cent below the decade average.

Other indicators trending below the decade average were dwelling starts (-34.6 per cent), housing finance (-24.5 per cent) and equipment investment (-9.8 per cent).

WA was also ranked as having the worst job market in the country, with a jobless rate of 6.1 per cent, above the 5.2 per cent decade average.

Despite WA sitting near the bottom of the CommSec ranking, the state recorded the fastest nominal economic growth in the year to December 2018, up 9 per cent, due to decreasing imports and increasing exports.

The report said states or territories which were underperforming but had rising annual growth, like WA, had scope to improve.

“There is underlying positive news:  annual population growth is now the strongest in three years (0.88 per cent), exports have been rising steadily, up 17.7 per cent on a year ago, and unemployment is at 15-month lows in trend terms,” CommSec chief economist Craig James said when analysing the WA figures.

The importance of the rise of exports was echoed in the Deloitte Access Economics Investment Monitor for March 2019, which found variations in the economic performance between states and territories was continuing to narrow.

States with lower economic performance, including Queensland, Western Australia and Northern Territory, were benefitting from rising gas exports, but states with typically stronger economic performance, such as New South Wales and Victoria, were being weighed down by a slowing housing market.

WA had $19 billion worth of projects under construction, a small portion of the $258 billion in the country.

The state also had $5 billion in committed projects, and $47 billion under consideration. 

While engineering work was less than one third of what it was during the peak of the mining construction boom in 2012, the report said the falls in the sector were over.

The state’s iron ore producers would need to invest in new mines or upgrade existing sites to replace ageing deposits across the Pilbara, Deloitte said in the report.

A few projects are already going ahead including BHP’s $5 billion South Flank project, which will replace the Yandi mine in 2021, Rio Tinto’s $3.5 billion plans to develop the Koodaideri mine to be started this year and Fortescue’s decision to approve the $1.7 billion Eliwana mine.

Despite the increase in projects in the mining sector, Deloitte warned those gains would be modest in comparison to those seen during the mining construction boom.

The report noted the commercial construction industry had fallen once again, after a brief recovery in 2017, due to soft retail turnover and slow employment growth.

Deloitte said unfortunately, unlike in the mining sector, the forward looking indicators for construction were not improving.

The value of building approvals fell by a third, Deloitte’s data showed notable declines in accommodation, retail, entertainment and recreation and offices sectors.

Shopping centre developments made up a large part of $4 billion worth of construction projects under consideration across the state.