21/07/2009 - 06:47

State must rely on China - economists

21/07/2009 - 06:47

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Western Australia appears to have weathered the global economic downturn but the resource-rich state must still rely on China's appetite for bulk commodities to stay in the clear, according to Access Economics.

Western Australia appears to have weathered the global economic downturn but the resource-rich state must still rely on China's appetite for bulk commodities to stay in the clear, according to Access Economics.

The economic forecaster's business outlook, released today, reveals that while Australia "made it through the most dangerous phase of the global recession with only collateral damage", WA typically suffers delayed shock to a global crisis because of the buffer of project investments in the pipeline.

In further good news, Access Economics says Australia is set to emerge from the downturn a year earlier than forecast and with far fewer people losing their jobs, with predictions that unemployment will hit 7.5 per cent, down from 8.5 per cent.

Access Economics director Chris Richardson said global demand and prices for commodities was rebounding, raising the potential for WA to survive the global recession better than most other states.

"Most importantly, therefore, the biggest question mark over Western Australia's short-term outlook and indeed Australia's, is the sustainability of recent Chinese commodity buying," Mr Richardson said.

"If China can maintain its pace and if world recovery comes sooner rather than later, then WA will get away with just a downturn rather than being deeper and darker.

"Alternatively, if the pace of Chinese buying is unsustainable, and if the major Western economies are slower to repair and if iron ore prices fall again from April 2010, then WA will see a sharper shakeout."

The Access Economics business outlook showed that although WA's construction pipeline is now being "eaten into", projects such as Woodside Petroleum's $11 billion Pluto LNG development, BHP Billiton's $7.4 billion fifth stage of the Rapid growth iron ore project, and Newmont's $4.5 billion Boddington gold mine, would continue to underpin the state's economic sustainability.

The Chamber of Commerce and Industry of Western Australia last week released its quarterly snapshot of the local, national and international economies, which also reveals there are early signs of an economic recovery.

CCIWA chief economist, John Nicolaou, said the past year would be remembered as a period in which the local economy showed surprising resilience amidst the steepest global economic downturn in history.

"Looking forward, the next 12 months will be a year of consolidation as businesses big and small from across the state look to the future with increasing confidence, and prepare for the next upturn," he said.

"Despite the local impacts of the global recession continuing to be felt across the economy, Western Australia remains one of the world's few economies that grew in 2008-09.
"Growth is for the financial year just ended is expected to reach 3 per cent, driven by strong economic activity in the first six months of the year.

"The next 12 months will remain difficult with the WA economy expected to contract by one per cent in 2009-10, which would have been a mild recession by global standards.
"Over the medium-term, the prospects for the local economy remain positive."

Recent surveys conducted by CCI measuring consumer and business confidence show that Western Australians are becoming increasingly upbeat about the prospects for the local economy.

CCI predicts the WA economy will grow by 4.5 per cent in 2010 11 and by 5.5 per cent in 2011 12, bolstered by stronger conditions overseas and renewed demand for WA exports.

However, the unemployment rate is tipped to peak at 6 per cent during 2009-10.

Figures by CCIWA show that the local economy shrank by more than 2 per cent during the first three months of 2009, which is the first contraction of the local economy in more than two years.

"There are early signs that the worst of the downturn may be coming to an end," Mr Nicolaou said.

"The rate at which economic conditions are deteriorating around the world has eased, while forward looking indicators in the United States, Japan and China have started to improve, providing an early indication that the worst recession in 75 years may be starting to subside."

 

 

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