By Leith van Onselen
Colin Barnett, Premier of Western Australia, has today given an interview on CNBC explaining why he believes that Western Australia’s economy is still going strong and why the state is not facing a recession or a period of decline.
Barnett notes the massive amounts of mining capital investment still in the pipeline and the fact that Western Australia supplies around three quarters of Australia’s exports to China, which is still growing strongly.
As explained in detail in last month’s Member’s report on Perth property, a glance at the key macroeconomic data pertaining to Western Australia does not support Barnett’s contention.
First, it does not matter that Western Australian capital expenditure (capex) remains at an historically high level, the fact is that it is now in decline (see next chart). While there will be some growth offset as export volumes ramp-up, the employment intensive phase of the mining boom – mining investment – is unwinding, which will weigh on both jobs and incomes going forward.
The slowing mining investment appears to already be having a detrimental impact on key macroeconomic indicators.
State final demand – a proxy for gross state product – had for much of the past decade exceeded the other mainland states. However, it has declined for two consecutive quarters, albeit from a very high level (see next chart).
Weakness has also spread to the Western Australian labour market, where annual growth in full-time jobs has slowed to a crawl, aggregate hours worked has turned negative, and the unemployment rate has risen by 1.2% over the past year (see next chart).
