WA's economic freefall is slowing and will reverse next financial year according to CCI's latest Outlook report. The report forecasts that business investment – the driving force behind WA’s recent mining boom – will finally stop falling next financial year and grow by three per cent for 2018-19.
The domestic economy – which measures the economy without exports and is also known as State Final Demand (SFD) – is also expected to come back to growth next financial year, returning from -15 per cent in 2017-18 to 2.5 per cent growth in 2018-19.
CCI Chief Economist Rick Newnham says the State Government must not increase the rate of taxes, fees and levies applied to the business community in the upcoming budget, to ensure the economy has a fighting chance to recover.
“Business investment is a critical driver of economic prosperity – when business investment grows, it creates a domino effect throughout the economy, where more big construction projects come on line, more money comes into the economy and more jobs are created for WA workers,” Newnham says.
“The only reason WA has avoided a recession is the growth in export income coming from completed mining projects – if you look at WA without exports, you can see that in the domestic economy, investment in business and the housing market have ground to a halt, and both the WA government and households have slowed down their spending.
"Export growth will be short lived however, which is why the WA government needs to usher in a new era of business investment by not raising taxes, fees or levies on business in the coming budget.
“CCI believes that WA is now 88 per cent of the way down the business investment cliff – thankfully, the worst is now behind us. Once investment returns to positive territory and the domestic economy begins to grow, we will see the entire economy start to recover.
“It is critical therefore that the State Government encourage investment and increased spending across the economy, which means the upcoming state budget must not contain any new or increased taxes, fees and charges for the business community.
Outlook is CCI’s biannual analysis of the WA economy.
This edition also examined how jobs in WA would look if population growth stayed at mid-boom levels.
“Unfortunately, the average annual unemployment rate is also forecast to persist above six per cent for the rest of the decade – the business community creates four out of five WA jobs, so it is critical the State Government does not restrict the business community with increased taxes, fees or charges, so business can continue to create jobs for workers,” Newnham says.
“CCI’s modelling also shows that part-time job creation has meant an extra 74,000 West Australians have stayed in the work force – had this amount of part-time jobs not been created, unemployment would be at a shocking 11.6 per cent, so it’s important we understand how important part-time jobs have been in breaking the fall."
To read the Outlook report in full, please click here.