Recent predictions of cooling Western Australian economic growth based on soft Chinese appetite for iron ore are pessimistic, according to the Chamber of Commerce and Industry.
Recent predictions of cooling Western Australian economic growth based on soft Chinese appetite for iron ore are pessimistic, according to the Chamber of Commerce and Industry.
National Australia Bank yesterday predicted the state’s gross state product would grow by just 0.6 per cent this financial year, well short of the 2.25 per cent forecast by the state government in the Budget in May.
Speaking to Business News on the projections, CCIWA chief economist Aaron Morey labelled NAB’s forecasts pessimistic but acknowledged that downward revisions could be undertaken to those who made more bullish predictions.
“The state government had growth at two and a quarter per cent, we had it at 1.75 per cent,” he said.
“I think 0.6 per cent is a bit pessimistic.”
NAB’s pessimism was attributed to uncertainty in demand for iron ore from China, which in 2021-22 contributed 46 per cent of the state’s GSP.
But Mr Morey said weakness in the realised price for iron ore would not necessarily deliver immediate economic impact – particularly with a strong pipeline of infrastructure projects lined up.
“Our medium to longer term outlook for iron ore is still really strong, as other emerging markets increase their demand and we see the significant increase in the need for iron ore to build out transmission infrastructure and fuel the renewables boom around the world,” he said.
NAB’s economic overview assessed household consumption figures based on an assumed cash rate of 4.6 per cent. On Tuesday, the Reserve Bank held the cash rate steady at 4.1 per cent.
Mr Morey said it appeared unlikely at the moment that the rate would go that high, and backed the state’s economy to continue with its momentum.
“I think Western Australia’s economy at the moment is particularly insulated from some of those concerns around consumption going forward, and our economy is going to remain strong over the coming years including this one,” he said.
“We’re also really outperforming when it comes to population growth, which is an important figure for those aggregate household consumption numbers.
“No doubt we’ll revisit our own forecasts around the economy, but I dare say we’ll be forecasting a lot stronger growth than what NAB is currently forecasting.”
