WA Business Outlook: Short-term prospects improve ahead of weaker growth period and recoveryDOWNLOAD
5 May 2014: While economic growth is still forecast to drop in in 2014-15, Western Australia’s short term growth prospects have improved since the December 2013 quarter.
Deloitte Access Economics’ March 2014 quarter WA Business Outlook forecasts Gross State Product for the coming financial year of 1.6%, up from a previously forecast 1.1%.
According to Deloitte Access Economics Partner Matt Judkins: “Our forecast for WA growth in 2014-15 is now slightly stronger due to a slight delay in the timing of the construction downturn.
“The value of commercial construction in the State is now forecast to fall by 10.2% in 2014-15, compared to an expected 12.6% decline forecast in the last quarter.
“A stronger export outlook and a lift in consumption and housing investment also contribute to our stronger growth forecast for the approaching financial year.”
“Although our forecast for WA growth is higher in 2014-15, it remains low relative to the previous five years, where we expect the WA economy to have grown by an average of 5.1% per annum by the end of this financial year.
“Weakening project spending in the resources sector certainly remains a factor, but a weaker business backdrop is also seen in slowing population growth, retail turnover gains well below the national equivalent, and hotel room occupancy rates finally dropping back from their earlier stunning highs.
“The good news, however, is that rising exports will partially fill this pothole, although not enough to compensate for the entire drop in construction activity that is expected. Exports could soar to two-thirds of the total of the State’s economy by 2020, with the third phase of the resources boom – the production or export phase – having WA happily back on a trend growth path by 2016-17.”
Focus on employment
The Outlook includes a focus on WA’s employment landscape, with the State’s latest unemployment figures actually masking the signs of a softening economy.
“In spite of slower growth being felt in the short term, the latest jobless figures for March raised eyebrows, with WA’s unemployment falling significantly – to 4.9% – compared to the national figure of 5.8%,” Mr Judkins said.
“This was a great result on face value, but the picture is not quite as rosy as the headline figures might suggest.
“The number of unemployed people in Western Australia fell by 14,400 on a seasonally adjusted basis in March, however not all of them gained employment. People employed increased by only 6,900 in comparison, and most this was not due to full-time job creation. The number of full-time jobs actually fell over the month of March by 8,000, with the overall increase in employment resulting from 15,000 new part-time positions.
“So there are two factors at play – a move from full-time to part-time employment, and a large proportion of the unemployed dropping out of the workforce.
“WA’s labour force participation rate also decreased by 0.5% in March and can be explained by a number of recent developments, including weaker job growth through the economic transition discouraging workers, and encouraging them to exit the labour force altogether.
“Lower interest rates have also meant second income earners have been under less pressure to remain in the workforce, and a fundamental demographic shift is underway, with baby boomer retirements to continue to accelerate.”
Mr Judkins said that over the short to medium term, WA would likely see a rising unemployment rate, with a forecast average 6.1% in 2014-15.
“The national rate will peak at a similar level and at a similar time, but the WA labour market is projected to recover at a much quicker rate, reflecting the positive medium term growth outlook for the State on the back of export-led growth,” he said.
“While we expect the resources sector to continue to provide steady, but not spectacular, employment prospects over this period, it will be other industries that are the real job growth drivers, including health, education, hospitality and information technology.
“An unprecedented structural change within the resources sector jobs market is also taking place, with a shift in favour of workers who are in greater demand during the operational phase of resources projects. This will see solid employment growth for trade workers, machinery operators and labourers.”
To download a copy of the WA Business Outlook click here.
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