Western Australia’s economic recovery slowed in 2018‑19, with gross state product increasing by 1.0 per cent, much lower than the growth of 2.5 per cent in 2017‑18. As a result, employment growth more than halved, from 2.2 per cent in 2017‑18 to 0.9 per cent in 2018‑19. The construction industry was the major detractor from growth, with construction activity falling on major mining projects and residential property. The manufacturing industry and earnings from dwelling ownership also detracted from growth.
A turnaround in construction activity is likely with an improved investment outlook. The fall in Western Australia’s business investment in 2018‑19 (down 7 per cent to $34.9 billion) is expected to be the last of the previous cycle, which peaked in 2012‑13. Business investment is expected to rise in 2019‑20 because of increased construction work on major iron ore projects, and increased front-end engineering and design work on proposed LNG developments, for which final investment decisions are expected in 2020. Large increases in minerals and petroleum exploration expenditure in 2018‑19 is also a positive signal for future investment growth. Labour demand is likely to increase with a turnaround in business investment, helping to stimulate the domestic economy.
Western Australia’s economic growth in 2018‑19 was driven by the ongoing ramp‑up of mining production and exports, and higher commodity prices. Mining industry gross value added rose 32 per cent to $103.1 billion in 2018‑19, which saw its share of the economy grow to 36 per cent - almost reaching its previous high of 37 per cent in 2010‑11.
While merchandise exports were a major contributor to Western Australia’s economic growth in 2018‑19, the rate of exports growth slowed to 1.5 per cent, from 5 per cent in the previous year. Iron ore and LNG exporters engaging new customers to develop their markets throughout Asia will support exports growth, as China’s demand for iron ore reduces and LNG projects reach full capacity. Exports growth will also be supported by other exporting industries – such as battery minerals, agriculture and manufacturing – attracting investment to expand production.
Growth in exports in the more labour-intensive services industries will also help to grow employment. The value of Western Australia’s services exports rose 1 per cent to $6.7 billion in 2018‑19, the first increase in three years. Demand is rising in Asia for tourism and international education services, as well as high quality agricultural products. Western Australia is yet to take full advantage of the growing demand for tourism and international education services in Asia, as much as other Australian states. The Western Australian Government has introduced new strategies and made policy changes to support growth in Western Australia’s services exports.
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