Investment paints positive picture for WA economy

“I know I’m not allowed to say ‘boom’ according to the Premier because it does have connotations of ‘bust’ but in the absence of saying something long winded like sustained period of global economic upturn…I’ll stick with ‘boom’ for the purposes of this presentation,” John Nicolaou told delegates.
“And the reason why I have such confidence is that through a variety of forward looking indicators it does look very positive overall.”
In terms of business confidence in Western Australia, the CCI’s data shows that expectations of the economy have gone from a record low in March last year to a record high in March this year.
“We’ve seen such a dramatic turnaround in confidence amongst WA businesses and that speaks volumes as to where the broader WA business community believes conditions will be in the next 12 months and beyond,” said Nicolaou.
Underlying that turnaround is a renewed appetite for investment and increase in employment rates. The CCI’s index of WA economic activity has been rising now for 11 consecutive months.
“…from the middle of last year we were quite confident that conditions would improve through 2010 because some of these forward indicators of performance were trending up quite sharply…we have an index now that’s at a record level and is 21 per cent higher than it was say 12 months ago,” said Nicolaou.
“And that really has caused us to revisit our forecasts for the WA economy over the near-term. Six months ago we were projecting that the WA economy would contract by just under 1 per cent…we now believe that the WA economy will grow by 1.5 per cent this financial year which is quite a remarkable achievement.”
According to Nicolaou it is business investment which has supported the WA and national economies through the Global Financial Crisis (GFC).
“We saw even during the height of the GFC during late 2008 and the early part of 2009, investment continued to grow…it really did buffer the local economy through the worst of the global economic downturn,” he said.
Beyond this year, the CCI expects economic conditions will pick up sharply and that WA could achieve rates of growth averaging between 5 and 6 per cent.
“Longer term the prospects are equally positive and…one of the best indicators of future performance that I can give…is to look at the value of investment projects that are either under construction or in the pipeline,” said Nicolaou.
He said there is more than $200 billion of investment in such projects in Western Australia, well in excess of any other State. To put that into perspective, the total output produced in Western Australia each year is around $150 billion.
“There’s no doubt the reason for this future investment boom is the opportunity we have…we are now in the second decade of what I call the ‘century of Asia’,” said Nicolaou.
“What that creates is significant demand from Western Australia for our key commodities and also services as we grow and mature into an advanced economy ourselves.”
Nicolaou said that in many ways Western Australia has been a State of opportunity but also a State of lost opportunity, because many projects didn’t get off the ground during the last decade due to capacity constraints.
“Early signs are that the labour scarcity will become a significant issue for WA business again. The other key aspect to labour is workplace relations,” he said.
According to the CCI, if Western Australia is to achieve the growth potential that is possible, it will need an extra 400,000 workers, increasing its workforce by around one third within the next 7-8 years. Nicolaou believes the State is likely to fall short of that figure by more than 150,000 workers.