Skills shortage dampens WA's booming economy

Western Australia's economy has been the stand-out performer in Australia in recent years and the outlook is still positive but it's not all good news according to Access Economics' latest Investment Monitor.

Access Economics believes the rapid development, the fast-tracking and the sheer number and scale of projects in WA has created problems including significant skilled labour shortages as a result of projects targeting the same pool of labour.

According to Access Economics Investment Monitor the driving up of wages and pushing on already heightened construction costs resulting in cost blowouts and major project delays have played a part in the continuing problems with the New MetroRail project and may play a major factor as to whether the $1.4 billion Boddington gold mine development gets the go-ahead.

The Investment Monitor also highlights cost blowouts for the Ravensthorpe nickel project, as well as Fortescue Metals' and BHP Billiton's Pilbara iron ore projects.

Another issue raised by Access Economics is the labour focus on resources projects may have resulted in other sectors experiencing construction delays. One example is the development of new office buildings which is causing rent prices to increase.

Over the next five years, Access Economics predicts output growth in Western Australia will average 4.3 per cent per annum compared with 3.5 per cent expected average annual GDP growth for the whole of Australia.

The Investment Monitor suggests the outlook for investment in Western Australia will remain rosy for the next one to two years with business investment being the key driver to the booming economy.

However, Access Economics warns the end of the investment boom in Western Australia is inevitable as the commodity prices eventually flatten out due to the further increase in the global supply of commodities.

Even though investment may taper off, the Investment Monitor suggests the rise in investment brought on by the lift in capacity in resource production will continue resulting in stronger volumes of exports, even if values are reduced.

The Investment Monitor outlines the strong housing sector activity in Western Australia as well as high levels of consumer spending is supported by the above average population growth.

Access Economics said a major reason behind why the economy is doing so well is as a result of business investment tends to contribute substantially to output in Western Australia.