Rays of sunshine among WA economic gloom

28 Apr, 2009 01:31 PM
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The boom is over, the bust is on, but there is light at the end of the WA economic tunnel, one of the country's leading economic forecasters says.

But it all depends, as did the boom, on China.

In its quarterly economic outlook for the state, Access Economics says after living through "one of the biggest booms it will ever see" WA was as dependent as ever on business investment.

"Wherever business investment goes in the next few years, WA's economy will go too," director Chris Richardson said.

"In turn, forecasting where business investment spending will go in the state comes down to how soon and how much China recovers."

China had big infrastructure spending programs in place and could get continuing growth in domestic demand as higher wages - eventually - flowed through to the rest of its economy.

Access - which has forecast recession for WA by 2010-11 - believed the WA unemployment rate would surge in the next three years, peaking at 7.2 per cent - or 89,000 people - in 2011-12.

Despite that, average weekly earnings would continue to grow between 2.3 and 5.7 per cent a year until 2012-13, when they would reach $1180.23.

Housing "remains enigmatic", Dr Richardson said.

"The forward indicators and new (housing) starts have been weak for ages, but... work done is still surging. What gives?" he said.

"It is certainly not any lack of underlying demand."

That was being provided by accelerating population growth - the state was growing about 2 per cent a year - , while by many measures, WA had the strongest rental demand in Australia.

"It could be lack of building capacity which, if true, would suggest housing activity in Western Australia will be well placed to lift once infrastructure demand eases."

Private housing investment was expected to grow 4.8 per cent next year, with a 12 per cent surge in 2010-11.

Access is even more glum than fellow forecaster BIS Shrapnel on engineering construction activity, saying private construction would halve by 2011.

However, Access agreed lower commodity prices would discourage new spending after a burst with major resources projects underway.

Commercial construction - especially in the health sector - was "still healthy", Dr Richardson said.

While it was forecast to fall by almost 30 per cent in each of the next two years, it would recover substantially in 2012-13.

Retail turnover would - apart from a small drop in 2009-10 - grow modestly in the next four years.

International tourist numbers, predicted to fall this year and next, would recover strongly after that, growing by between 6.1 and 9.6 per cent in the following three years.

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