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.
Western Australia’s total business investment fell in each year since peaking at over $76 billion in 2012-13, as construction on major resource projects wound down. However, with large LNG projects in their final stages of construction – including the Wheatstone project that began exports in 2017-18 – around 85 per cent of the forecast decline in investment from the 2012-13 peak has now passed.
The Western Australian economy has moved from investment-led growth to export-led growth over recent years. New productive capacity created by the investments 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. Growth in export volumes is likely to be lower in coming years as LNG projects ramped up to full capacity and Chinese demand for iron ore reduces.
Major resource 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.
Prospects for the Western Australian economy are positive with investment in new projects and increasing minerals exploration and job vacancies. Resource companies made commitments to a number of new projects in 2017-18, including Stage 2 of the Gorgon LNG project, BHP’s South Flank iron ore project, Fortescue Metals Group’s Eliwana iron ore project and the second stage of Tianqi’s lithium processing facility. Rio Tinto is also considering developing its Koodaideri iron ore project and LNG producers are considering investments to backfill, or possibly expand on, existing facilities.
While recent announcements for new projects indicate that resources will remain a mainstay of the Western Australian economy, the resources industry is capital intensive and may become even more so as companies increasingly look to automate their operations. If employment growth is to be sustained in Western Australia, economic activity will need to broaden into other more labour intensive sectors.
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 tourism and international education 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. Western Australia is yet to take full advantage of China’s growing demand for tourism and international education services as much as other states of Australia, with services exports down marginally in 2016-17.
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