Economic growth data released today shows that Western Australia is growing faster than China, at almost 10 times the national economic growth rate which has slumped to a five-year low.
Economic growth data released today shows that Western Australia is growing faster than China, at almost 10 times the national economic growth rate which has slumped to a five-year low.
WA recorded 14 per cent annual growth in the seasonally adjusted State Final Demand for the 2005-06 financial year according to the Australian Bureau of Statistics. This was, as state treasurer Eric Ripper took the trouble to point out, higher than China's growth rate of 11.3 per cent for the same period.
By contrast, growth in national gross domestic product was just 1.9 per cent, the slowest pace recorded since the year to June 2001.
The main driver of WA's growth was a big increase in private business investment, which fuelled a 5.6 per cent increase in State Final Demand in the June quarter.
Government final consumption expenditure in WA was also the highest in the nation in the June quarter, up 5.7 per cent, as was growth in public gross fixed capital formation (up 7.3 per cent) and household final consumption expenditure (up 1.2 per cent).
Mr Ripper said in an announcement that the SFD figures showed the State's domestic economy was largely being driven by business investment.
Nationally, gross domestic product grew by a seasonally adjusted 0.3 per cent in the June quarter, following a downwardly revised increase of 0.7 per cent in the March quarter.
The results failed to meet economists' expectations for a quarterly lift of 0.7 per cent and an annual increase of 2.6 per cent.
"For an economy that is supposedly one of the biggest beneficiaries of the global expansion and commodity boom, the latest results are disappointing," CommSec chief equities economist Craig James said.
"It no doubt takes time for the economy to convert booming commodity prices into increased capacity, production and exports, but the wait is becoming frustrating."
The sluggish pace of economic growth meant the Reserve Bank of Australia was highly likely to remain on the interest rate sidelines for the remainder of 2006, Mr James said.
The central bank left the overnight cash rate steady at six per cent today in a widely expected move, having already hiked by 25 basis points in both May and August this year.
The latest report card on the economy showed domestic final demand grew by a solid 1.2 per cent in the second quarter and 3.8 per cent over the year, but that this was overshadowed by a large rundown in business inventories.
Business inventories made a negative contribution to GDP growth of 0.7 percentage points in the quarter, while net exports subtracted 0.2 percentage points from growth.
St George head of economic research Steven Milch said Australia's export performance was a key concern.
"Quite simply, export volumes are unable to keep up with imports, despite the resource boom," he said.
"We are optimistic, however, that this will reverse in coming quarters as mine projects come on line."
Mr Milch said the latest figures would help take some of the pressure off the RBA to raise rates again.
"The underlying rate of economic growth is still sound though, and running close to the rate of productive potential," he said, referring to the rise in domestic final demand.
"Accordingly, capacity constraints and inflationary pressures will remain features of the economy and the RBA will retain its tightening bias."
Prior to the GDP report, economists were predicting the next window for a possible rate rise would be November, following the late October release of the third quarter consumer price index, a key measure of inflation.
While National Australia Bank expects rates to remain on hold for now, it believes the data will give the central bank some more breathing room.
"Clearly this adds to the case for the RBA to wait at least until the third quarter CPI and what this throws up as far as underlying inflation is concerned, and then to make a re-assessment of aggregate demand going forward," NAB senior markets economist David de Garis said.
The ABS report showed total dwelling investment grew by 3.7 per cent in the June quarter, while total private business investment was up two per cent.
