After a decade of unprecedented investment, Western Australia’s economy experienced a downturn in 2016‑17, but positive signs are emerging.
Western Australia is a highly‑competitive exporter of minerals and petroleum commodities and the mining industry is a large contributor to the economy. Fluctuating global commodity prices, and lumpy minerals and petroleum investment, can affect Western Australia’s economic activity over time.
The Western Australian economy has moved from investment-led growth to export-led growth over recent years. New productive capacity created by investment over the past decade has increased export volumes. However, in 2016‑17, export volumes growth was not enough to offset falling investment, and the economy contracted for the first time since the gross state product (GSP) series began in 1989-90. Construction, business and property services, and manufacturing industries detracted significantly from GSP growth in 2016-17.
A recovery in commodity prices increased the value of Western Australia’s exports in 2016-17. A turnaround in exploration and investment activity, and the continuation of exports growth, is likely if higher commodity prices persist. Minerals exploration has already begun to increase, particularly for gold.
The major mining projects developed over the past decade require large, ongoing operating and capital expenditures to sustain their operations, creating opportunities for the mining services, manufacturing and transport industries, and higher mining employment. Mining employment almost doubled over the decade to 2016‑17.
Economic activity is broadening to other parts of the economy, as the needs of Western Australia’s export markets change and businesses benefit from increased availability of labour and lower input costs.
In particular, Western Australia’s main trading partner – China – is moving from investment‑led growth, with high demand for resources, to consumption‑led growth, with growing demand for high quality agricultural products and services. In 2016-17, Western Australia’s agriculture-related exports grew, particularly to China, and the agriculture, forestry and fishing industry was the largest contributor to GSP growth, along with mining.
Services exports were down marginally in 2016-17 as the Australian dollar appreciated. If the exchange rate returns to around its long-term average, the competitiveness of agriculture, manufacturing, tourism, education and other services exports will increase.
Conditions in Western Australia’s labour market improved in 2017, with over 50,000 more people employed at end of 2017 than at the low in September 2016. Job vacancies and labour force participation have increased significantly, although higher participation resulted in an increase in the unemployment rate in the second half of 2017, as it takes time for job seekers to be matched to job vacancies. A decrease in the underemployment rate shows that many part‑time workers are gaining more hours of work.
Despite the improved conditions in the labour market, wages growth remains low – which is also true for the Australian economy (and some other developed countries). However, the steady increase in job vacancies, particularly in higher‑paid mining, business and property services, construction and health jobs, is a positive sign for an increase in wages growth.
The Department of Jobs, Tourism, Science and Innovation publishes a monthly report on the Western Australian economy. The Western Australia Economic Profile covers the latest trends in:
- gross state product and associated macroeconomic measures
- industry composition of the economy
- terms of trade and commodity prices
- population growth
- labour market
- consumption and household income
- property market and construction activity
- international trade in goods and services
- minerals and petroleum sales, including iron ore, LNG and gold
- regional population, labour markets, minerals and petroleum sales, building approvals and agriculture production
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