The Western Australian economy continues its slow but steady recovery, with higher investment, lower unemployment and slowly increasing wages growth forecast for the State.

This is the call from the Chamber of Commerce and Industry WA’s (CCI) biannual forecast for the WA economy, Outlook, which outlines how we believe the economy will perform over the next three years.

Falling business investment has continued to put bumps in the road of WA’s economic recovery, but with significant resources investments in the pipeline the resources sector will once again lead WA’s economic resurgence, albeit at a slower pace to what many West Australians have experienced in the past.

We expect a ramp up of spending on major new and replacement resources projects to turn the 8.4 per cent decline in business investment WA has seen in 2018-19 around to a 6 per cent increase in 2019-20, increasing to 9 per cent in 2020-21.

Businesses outside the resources sector will unfortunately be slower to recover, with the retail sector in particular expected to continue to struggle from low consumer spending and higher wages and bills exceeding revenue.

We have revised down our expectations for household consumption from 1.5 per cent to 0.7 per cent for 2018-19, but expect recent RBA interest rate cuts, combined with income tax relief from the Federal Government and increased employment of skilled workers in the resources sector to give West Australians a boost in disposable income in the following years. We forecast household consumption to increase to 1.2 per cent in 2019-20 and 1.5 per cent in 2020-21.

Despite bad weather across the Pilbara in March putting a halt to some iron ore exports, our forecast for 5 per cent growth in exports in 2018-19 remains on track. We expect this growth to continue over the next three years, increasing by 4 per cent in 2019-20 and 2.5 per cent in 2020-21 on the back of increasing capacity and higher iron ore prices.

Ongoing trade tensions between the US and China remain a significant concern for WA’s economic recovery, with WA’s economy being more dependent on China than any other Australian state.

Fifty-five per cent of WA’s exports go to China and 53 per cent of our economy is dependent on exports, which means continued global tension is a double-edged sword for WA. China’s response to its economy slowing further could either bolster the WA economy – if it proceeds with further Government funded infrastructure stimulus – or our export growth could be put at risk.

Unemployment remains a significant but slightly easing concern in WA for the foreseeable future, which will limit wages growth in the short term. We expect unemployment to remain at similar levels to the past couple of years at 6.0 per cent in 2019-20 and 5.9 per cent in 2020-21, while wages are forecast to increase by 1.7 per cent in 2019-20 and 1.9 per cent in 2020-21. This remains an improvement on 2017-18, which saw wages growth of 1.5 per cent.

To read Outlook, please click here.