Western Australia has reached a turning point – we are through the worst of the state’s economic woes.
This is the message from CCI’s latest biannual forecast for the WA economy, Outlook, which looks forward for the next three years.
CCI Chief Economist Rick Newnham said CCI is confidently optimistic about the future, forecasting the whole state economy will grow by 0.9 per cent this year and will continue to improve.
“This will be welcome news to business and families following a year of negative economic growth that has put pressure on investment, wages and job creation,” Newnham says.
“A few key indicators tell us WA is now confidently on the mend – consumer and business confidence are at a four-year high, 15,000 full-time jobs have been created in the past year, and exports are growing at 5 per cent a year.
“Our state’s falling business investment has been a weight pulling down WA’s economy and restraining jobs growth,” he says. “Once business investment stops falling and returns to growth, which we expect will be this year, the whole economy will begin to pick up.”
The findings follow on from the recent WA Super – CCI survey of business confidence which found 65 per cent of WA businesses are expecting the economy to improve or stay the same in the short term.
Flexibility in the labour market has taken the sting out of the economic pain in WA after the mining construction boom, and the creation of part-time jobs has helped to prevent a major fall in household spending.
“CCI expects the jobs market to continue to improve this year, forecasting an unemployment rate of 5.6 per cent next financial year,” he says.
“This should be welcome news for job hunters and those who are already employed. When there are more people in work and fewer people competing for limited job vacancies, then we can expect wages growth to return to WA as well.
“Wages growth has been quite low in advanced OECD nations around the world, like Australia, over the past few years but once the unemployment rate falls in WA, we expect wages growth to rise.
“CCI forecasts wages to grow by 1.7 per cent this financial year and increase to 2.4 per cent growth in 2018-19.”
WA continues to spearhead the nation’s trade effort, accounting for more than 35 per cent of Australia’s total exports. CCI forecasts a 6 per cent increase in exports this year as more LNG and iron ore is shipped abroad and commodity prices rally slightly higher than last year.
“The dark clouds of the WA Government’s deficit and net debt looms overhead as a threat to WA’s economic recovery,” Newnham says.
“For business confidence to turn into job creation, WA businesses need to feel confident that the State Government will maintain the current investment climate.
“The Government must keep its focus on reducing spending to tackle net debt, not introducing new or increased taxes, fees or charges to ensure that business confidence continues to improve in WA and more jobs are created.”
View Outlook here