Western Australian economy likely to face tough year, consumer spending to remain weak

The Western Australia’s economy is likely to face a tough year; however, it is expected to register growth in the export sector. The level of employment is nearly 1.4 million, which is an all-time high.

In the last 30 years, Western Australia has grown in fits and starts. Even if the glow from the expansion of mining investment is waning quickly, the volumes of export have increased. The economy’s certain sectors are struggling; however, some continue to be strong. The outlook appears to be tough, but it is not dull either, said St George Economics in a research note.

Commodity prices cycle plays an important role in Western Australia’s economy. The Chinese economy’s altering shape and global supply responses to the sharp rise in demand for resources from China have exerted a considerable downward pressure on energy prices and iron ore. Subdued prices of commodity have stressed government finances and lowered the possibility of new projects breaking ground, according to St George Economics.

Deceleration in mining investment remains a drag on West Australia’s business investment. Even if investment in mining has considerably decelerated, there is additional weakness in Western Australia’s business investment. In mid-May, the 2016-17 budget for Western Australia was laid down.

The state is forecast to record a deficit of AUD 3.9 billion for the 2016-17 year and is expected to be the biggest ever in Western Australia. Meanwhile, revenue is anticipated to drop 3.1 percent, the third straight year of decline. The WA government seeks to take over asset sales amounting to around AUD 16 billion in a bid to cut its debts.

Moreover, consumer spending is likely to remain weak in the 2016-17 period due to subdued growth in wages and population, and a weaker economic outlook. WA’s population growth has decelerated to 31,000 in 2015 from 88,000 in 2012. Meanwhile, residential property prices and building permits have dropped, whereas construction activity is expected to decelerate from the present high levels, added St George Economics.