Can WA crash contagion be contained?

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It may be that us armchair commentators of the east enjoy a bit of giggle at the bumbling of Colin Barnett and his failing budget. But there are a few data points today that suggest that something very serious indeed is baring down on our Western cousins and they are beginning to awaken to it.

CaptureThe resumption of iron ore price weakness is one such point. The agonising death throes of Andrew Forrest is another. But perhaps most pointed of all today is Westpac’s consumer sentiment survey which bounced solidly everywhere except WA. In the West, it cratered 7.7% to a level far below that reached during the GFC (forgive the dodgy chart).

Western Australians have every right to be alarmed. Their mismanaged state is entering an historic bust that the government appears oblivious to and there is nothing on the horizon to prevent it reaching historic proportions.

Most readers will know by the now the basic outline of the problem. WA has hung its economy on a vast construction boom that is swiftly going bust. Because it doesn’t benefit from the export volumes that come when its major commodity projects are completed (only the wider nation does) the failure to prepare for the end of the boom has left the state facing a gigantic cliff in business investment:

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.