The Western Australian economy, like most other economies around the world, is being affected by the COVID-19 pandemic. The Western Australian economy grew by 1 per cent in 2018‑19 and there were signs of increasing economic and employment growth in the early months of 2020. The health and safety measures to reduce the spread of COVID‑19 resulted in a sharp downturn in the economy, which was largely felt in the last quarter of the 2019‑20 financial year. However, Western Australia’s success in containing the spread of COVID‑19 means the economy is in a relatively strong positon for recovery.
The effects of COVID-19 have not been uniform across the economy. Fortunately for Western Australia, mining industry output has been relatively unaffected. Mining accounted for 36 per cent of Western Australia’s gross state product in 2018‑19 and accounts for the majority of the State’s exports and investment. In March 2020, the value of Western Australia’s merchandise exports reached a monthly record of $17.7 billion, including $9.1 billion of iron ore exports. While supply out of Western Australia has continued largely unabated, sustaining export values will largely depend on demand from the State’s major and emerging export markets.
The COVID‑19 pandemic is having the greatest effect on non-mining related services industries, such as tourism; international education; food and beverage services; retail trade; and transport. The WA Government, in its effort to contain the spread of the virus, restricted travel to and around the State and required some businesses providing non-essential services to reduce operations or close temporarily. This led to significant job losses given most Western Australians are employed in services industries. Total employment in Western Australia fell by over 100,000 between February and May 2020. However, the easing of restrictions on travel around the State and on the way businesses provide services led to employment rising by over 40,000 between May and July.
Increased construction activity on major iron ore projects resulted in annual business investment rising for the first time in 7 years in 2019-20. The effects of the COVID‑19 pandemic on global demand, the mobility of workers and the availability of equipment and materials means the outlook for business investment is variable across different sectors. Slower progress on lithium projects under construction in 2019-20 will see greater than expected construction activity on these projects in the coming year, while higher gold and nickel prices is likely to support investment in these sectors. However, the outlook for investment in the oil and gas sector – which accounts for a large share of potential business investment in coming years – is much more uncertain, as evidenced by delays in investment decisions on major LNG projects.
The WA Government’s housing stimulus package and the Australian Government’s Homebuilder Scheme will provide much needed support to dwelling investment in the coming year, as residential construction activity is significantly challenged by reduced employment, incomes and overseas migration.
The WA Government released the WA Recovery Plan on 26 July 2020. The WA Recovery Plan outlines the economic support the WA Government has provided during the COVID-19 pandemic and its priorities for the economic recovery.
A supplementary WA Economic Profile is also available on the Department of Jobs, Tourism, Science and Innovation’s web site, which captures the immediate effects of COVID-19 on the Western Australian economy.
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