05/06/2019 - 15:57

WA economy continues to shrink

05/06/2019 - 15:57

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Western Australia’s domestic economy was the smallest it has been since 2010 in the March quarter, with state final demand just below $50 billion.

WA economy continues to shrink
Quarterly demand, which includes household spending, is 17 per cent below its September 2012 peak. Photo: Gabriel Oliveira

Western Australia’s domestic economy was the smallest it has been since 2010 in the March quarter, with state final demand just below $50 billion.

The latest numbers from the Australian Bureau of Statistics show state final demand fell 0.3 per cent in seasonally adjusted terms in the three months to March.

The measure, which excludes the impact of exports and imports, has fallen for three consecutive quarters, and was down 1.4 per cent on the level of March 2018.

The last time WA’s domestic demand was lower was in the December quarter of 2010.

Put another way, quarterly demand is 17 per cent below its September 2012 peak of $60.2 billion.

The big driver of the fall has been a continued reduction of business investment, which was $10 billion in the March 2019 quarter, down 10 per cent on one year earlier.

State final demand contracted in the quarter in two other regions, South Australia and the Northern Territory.

Opposition leader Mike Nahan said the domestic economy was in recession.

“It’s quite a feat of mismanagement for a premier to be the recipient of billions of dollars in additional cash and at the same time send a state into recession,” Dr Nahan said.

“Premier Mark McGowan and Treasurer Ben Wyatt can keep telling everyone that everything is great but the string of shops and pubs closing across Perth, the record number of unemployed and the shrinking economy tell a very different story."

National

The bureau said Australia's gross domestic product grew by 0.4 per cent in the March quarter 2019, for a 12-month increase of 1.8 per cent.

That level was below trend, according to NAB.

“While growth was slightly stronger in quarterly terms, this outcome confirms the softening in growth over (the second half of) 2018 has persisted into 2019,” NAB said.

“Continued subdued economic activity will be a headwind to growth in labour demand, which is needed to prevent a rise in the unemployment rate.

“With ongoing spare capacity in the labour market and economy more broadly it is likely that domestic inflation pressures will remain weak.

“Today’s release will have little impact on the near-term path for monetary policy, with the RBA remaining focused on developments in the labour market.

“That said, the data suggests some risk of a further easing in the cash rate to below 1.0 per cent should growth remain weak and the private sector continue to lag.”

AMP Capital chief economist Shane Oliver said the need for quantitative easing was a rising risk, while the outlook for 2020 was challenging.

“The weakness in the Australian economy that started in mid-2018 has continued into early 2019 with the latest GDP data showing low economic growth in the March quarter,” Mr Oliver said.

“What’s more, the make-up of growth in the March quarter remains concerning, with falling private final demand for the second quarter in a row.

“Were it not for government spending and net exports GDP growth would have been zero.”

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