Western Australia's economic growth is set to rise by 6.5 per cent this financial year on the back of strong local conditions and export growth, according to the WA Chamber of Commerce and Industry's quarterly outlook for March.
Western Australia's economic growth is set to rise by 6.5 per cent this financial year on the back of strong local conditions and export growth, according to the WA Chamber of Commerce and Industry's quarterly outlook for March.
The review found the state's economy made a rebound in the final quarter of 2006, following decreased economic activity during the September quarter.
Domestic economic activity, as measured by growth in state final demand, increased by 4.3 per cent during the December quarter, bringing the total rate of economic growth to a massive 10.5 per cent for the 2006 calendar year.
Consumer spending and dwelling investment grew strongly, while record levels of investment boosted production capacity, particularly within the mining sector. Export growth, however, was flat in 2006, with net exports falling by 13 per cent, while imports increased by 27 per cent.
WA was the most significant contributor to the nation's economy, accounting for 36 per cent of the increase in national domestic demand in the December quarter, and 27 per cent of the year's increase.
Export growth and capital expansions are forecast to strengthen this financial year, with net exports expected to be up by nine per cent.
The full text of an announcement from the CCI (WA) is pasted below
WA outlook strong after China-like growth in 2006
The WA domestic economy expanded at the China-like pace of 10.5 per cent during 2006 as a result of surging business investment and strong growth in both consumer spending and housing investment.
In its latest WA Economic Compass released today, CCI found the local economy rebounded strongly during the months leading up to Christmas, making up for a quiet September quarter in which the rate of growth actually fell.
CCI believes the state is positioned for another buoyant year with investment in expanded production capacity, particularly in its export industries, set to kick in. The Chamber is forecasting WA will achieve growth of 6 ½ per cent in 2006-07 and a further 5¾ per cent in 2007-08.
The report indicates business investment has been the driving force in the state's continuing strong economic performance. WA recorded 15.9 per cent growth in business investment in the December quarter alone, contributing to a calendar year growth of 31.8 per cent.
CCI chief economist John Nicolaou says the prospects for the state economy remained very strong and would benefit for the time being from today's hold on interest rates by the Reserve Bank. He says the Bank's decision reflects the less remarkable economic picture across Australia.
"The uneven pattern of growth across Australia, along with evidence that inflationary pressures easing during the last quarter of 2006, would suggest that interest rates are best kept on hold in the near term," Mr Nicolaou said.
"While the economic data has not provided firm evidence of a need to increase interest rates at this time, this picture may be complicated by the upcoming Federal budget and the election later this year," Mr Nicolaou said.
The latest WA Economic Compass found there were quite marked regional economic differences amongst the states and territories, with the boom states of WA and Queensland masking weaker growth in other states.
While WA's domestic economy grew by 10.5 per cent and Queensland's by 7.6 per cent during 2006, this compared against growth of just 1.5 per cent in NSW, 2.7 per cent in Victoria, 1.9 per cent in South Australia, and a fall of 1.4 per cent in Tasmania - meaning that Tasmania was technically in recession during 2006.
While WA economic growth is expected to remain broadly based, export activity is expected to increase considerably as capacity expansions undertaken across the state translate into higher levels of production.
Net exports are forecast by CCI to rise by nine per cent in 2006-07 and a further 16¾ per cent in 200708, contributing two-thirds to overall economic growth in the state. This represents a sharp turnaround from 2006 when net exports fell by 13 per cent.
Consistent with the favourable economic prospects, labour market conditions are expected to remain very tight in WA over the next two years as labour shortages continue to constrain activity.
However, increasing population growth and higher labour force participation should still ensure that employment rises by a solid 2¼ per cent in 200607 and again in 2007-08.
This should ensure the unemployment rate likely to remain at current 33-year lows over the second half of 2006-07 and over the course of 2007-08. The likelihood that the unemployment rate will be able to break through the three per cent barrier will depend on the extent to which the labour market expands.
Mr Nicolaou said the national economy was expected to strengthen over the course of the next two years, as housing activity picked up after a prolonged slump.
"This should ensure that the national economy expands by around 3¼ per cent through next financial year," he said.
