While WA continues to record impressive economic growth, the CCI’s latest quarterly outlook highlights an economy of mixed fortunes.
John Nicolaou, chief economist at the CCI, points to the ongoing uncertainty about the global economy and states that the expected economic growth for the economy will be 5.25 per cent 2011-12, a one percentage point downgrade from the previous forecast in September.
Mr Nicolaou believes this is largely due to the slower growth in China which will reduce demand for WA’s export commodities.
If the European debt crisis worsens, he says that economic growth in WA could be 1.5 percentage points lower over the next financial year.
Mr Nicolaou believes the state is well placed to withstand such a shock due to close links with developing Asia and the volume of projects in the pipeline for development.
He says the unprecedented wave of investment in the resources sector will see business investment rise by 20 per cent this financial year. As a result, the domestic economy is tipped to grow by an impressive 7.25 per cent during 2011-12.
Mr Nicolaou concedes that not all local businesses are experiencing growth. Many small businesses are continuing to do it tough facing poor sales, declining profits and rising costs.
This is likely to exacerbate labour shortages as well as fuel wages growth as a further cost burden on business.
Other risks on the horizon include the imminent introduction of the Federal Government’s carbon and mining taxes. These will add a further layer of uncertainty for business at a time when they least need it.
