15/08/2024
WA had the strongest economic growth of all Australian states over the past year, CEDA Chief Economist Cassandra Winzar told a CEDA trustee event in Perth last week, but the state needed to diversify to better respond to future shocks.
“We're expecting continued growth here, but we still need to focus on diversification for the longer term,” Ms Winzar said.
“There is going to be a time when we won't be able to rely on mining, or iron ore in particular, in the way that we currently have.
“Who knows when that is? But we need to be prepared for it and try and even out some of these big booms and busts that we see in the Western Australian economy to weather some of those downturns a little bit better.”
The jobs market remains robust, with unemployment in WA at 3.7 per cent in July, lower than the national rate of 4.2 per cent.
“For some time we've been that little bit lower than everywhere else and that fits with the fact that we've got that slightly higher economic growth as well,” Ms Winzar said.
WA also has a higher labour-force participation rate than any of the other states, at 68.9 per cent.
“This means a lot more Western Australians are employed, and so even in periods where we've had relatively high unemployment rates, it's actually still maintained that high participation rate,” Ms Winzar said.
Despite this, job vacancies in the state have fallen from 55,000 a year ago to about 42,000 today.
“We have maintained these really tight labour market conditions. It has eased a bit, but it's nowhere near what we were looking at in the pre-COVID period,” Ms Winzar said.
While the job market remains strong, Perth had the largest increase in inflation in the last quarter, to 4.5 per cent.
While this was partly due to an increase in rents and new housing costs, the end of energy rebates from the previous quarter had pushed inflation back up.
“We had the last round of energy rebates in the previous quarter, which had reduced things and now prices have gone back up,” Ms Winzar said.
“We'll see it reduced again in the next quarter when new energy rebates come through, so it's a bit of a technicality saying that Perth has had higher inflation than the rest of the nation,” she said.
High inflation and stimulus from recent state and federal budgets were making the Reserve Bank of Australia’s (RBA’s) job more difficult.
“The WA Budget and the Federal Budget were very clearly pre-election budgets and similar up in Queensland as well, which means there's a lot of money floating around, probably too much for the RBA's liking,” Ms Winzar said.
“It's a particularly challenging time for the RBA at the moment and I think the board decision this week must have been one of the hardest they've had to make,” she said.