The current financial crisis is the most significant event to impact the global economy in recent years, however there are signs which suggest the economic slowdown is unlikely to be as severe as many first thought.

The State’s peak business organisation, the Chamber of Commerce and Industry of Western Australia, is being told by its members across the State that they are concerned about their prospects should the current uncertainty transform into a long lasting economic downturn.

Consumer and business confidence has suffered in recent weeks, especially among small and medium enterprises, which are a driving force of the State and National economies.

Businesses that are not directly associated with the mining and resources boom are being hardest hit, especially those that rely on discretionary consumer spending such as retail, hospitality and tourism.

Later this week, CCI will represent WA small business at a national summit on the global financial crisis to be held in Brisbane to be attended by the Prime Minister and other senior federal government ministers.

It is important that during these uncertain times that Australia’s decision makers realise the important role WA business and industry plays in generating wealth, jobs, and investment opportunities for the entire nation.

Meanwhile, today’s release of new figures for the September quarter showing that inflation rose at its fastest pace in more than a decade should not deter the Reserve Bank of Australia from further cutting interest rates as part of its efforts to stimulate the national economy, and help insulate it from the global financial crisis.

Despite broad pessimism about the global economy, signs are beginning to emerge that financial conditions across the world are starting to improve, and that the crisis may be short lived.

This has been highlighted by recent comments by Reserve Bank governor Glenn Stevens in which he said the likelihood of a “global catastrophe” has declined in the past fortnight.

Small, medium and large businesses across WA should take heart from Mr Stevens’ view that the worst of the downturn could be behind us, and the credit crunch is easing.

Those comments, combined with fresh data from the United States which indicate that the slowdown in the world’s largest economy may be less than first expected, paint a more positive picture of the world’s, and WA’s, economic prospects.

CCI believes WA is well placed to withstand any slowdown, particularly due to its strong trade links with China, which despite some cooling in its economy in recent months, remains on track to record near double digit growth.

The Chinese economy is expected to remain resilient over the next financial year and well placed to weather a downturn in the global economy, as it continues its industrialisation and urbanisation.

While export markets are becoming tighter, there is a widely held view that WA’s resources boom is by no means over. Mining giant BHP Billiton today predicted long term commodity demand from China won’t be derailed by the global financial crisis. This comes on the back of new figures showing BHP Billiton’s iron ore shipments from Australia rose to a new record high.

As a result, CCI’s forecast for economic growth in WA remains unchanged, with growth near or above 6 per cent for the remainder of the decade.

While all world economies are exposed to the current slowdown, some are better placed than others. CCI believes that Western Australian business and industry are among the best placed in the world to ride out the current uncertainty.

Statement by CCI Chief Economist John Nicolaou

Media contact: David Harrison                       9365 7680       0419 929 622