Boomtown’s bounce is back as economy out of the woods
The West Australian economy is “out of the woods”, one of the nation’s most respected forecasters has declared, with housing and wages finally gaining traction.
Amid warnings the Turnbull Government was making the same mistake of the Howard government by spending a temporary revenue bump on expensive personal income tax cuts, Deloitte Access Economics said the outlook for WA was definitely brightening.
The State endured its worst year on record through 2016-17 while the domestic economy had been in the doldrums for the past four years. But a string of data, including job figures, point to an important turnaround.
Deloitte Access director Chris Richardson said it was now clear WA was recovering from the economic “wave” that was the end of the mining boom.
He expects a lift in retail sales, population growth, wages and housing construction will all improve through this year and accelerate into 2019-20.
Wage growth alone is tipped to more than double the insipid 0.6 per cent growth endured by private sector workers last financial year. “WA’s economy is out of the woods, but it isn’t quite yet out of the doldrums,” Mr Richardson said.
“The good news is that WA’s economy is gradually making its way on to a more settled and sustainable path. The State is restructuring and rebalancing and looking for non-mining related sources of growth.”
While most focus has been on the collapse in engineering spending by the mining sector, Deloitte Access highlighted the step-up by the State Government to fill the void.
It said the first stage of the $3 billion Perth Metronet, which includes 72km of rail line and 18 stations, would give a needed boost to the local economy. The situation is a little different for the Federal Budget, with Deloitte Access concerned that recent tax cuts are built on a mirage of improved tax revenues.
Mr Richardson said tax cuts were built on an increase in tax revenues that was likely to be transitory. The Budget was also expecting to absorb the cuts while it was still in deficit.
He said a gradual slowdown in China would eat into the better tax collections from the resources sector while a tightening of credit would hit east coast property markets. “Oz has repeated an old mistake: spending a temporary revenue boom on permanent promises,” he said.
Source: Shane Wright, Economics Editor | The West Australian