OVERVIEW
ECONOMIC SUMMARY
Western Australia's major economic indicators continue to report significant movements. A standout was Perth's Established House Price Index which recorded a 45.9% increase through the year to September quarter 2006. Coinciding with this rise in house prices was a decline in the number of dwellings financed in Western Australia, falling from a peak of 9,588 dwellings in May 2006 to 8,861 dwellings in October 2006. Perth's Consumer Price Index rose by 4.8% through the year to September quarter 2006, well above the national average of 3.9%. In November, the Reserve Bank of Australia lifted official interest rates (by 25 basis points to 6.25%) for the third time in 2006.
Western Australia's Gross State Product (GSP) in current prices rose by 15.9% in 2005-06, the highest rate of growth across Australia. On a per capita basis, Western Australia recorded the second highest increase in GSP after the Northern Territory (5.4%), with 3.0% growth in 2005-06. Growth in the state's Real Gross State Income per capita of 8.5% in 2005-06 was almost three times greater than its GSP growth per capita (3.0%), and was well above the Australian average of 1.5%. In trend chain volume terms, growth in Western Australia's State Final Demand has continued to slow over the last three quarters, decreasing from 3.8% in the December quarter 2005 to 0.7% in the September quarter 2006. In seasonally adjusted chain volume terms, State Final Demand in Western Australia recorded its first fall in more than four years, declining by 3.4% ($920 million) in the September quarter 2006. This was mainly driven by lower private and public investment in the state. Private business investment fell markedly during the quarter for Machinery and equipment, down $596 million (20.6%), and for Non-dwelling construction, down $423 million (12.5%). Public investment was also down during the September quarter, decreasing by $213 million (16.6%).
Over the past few years the total value of Western Australia's exports increased dramatically, by $15,502 million or 48.0% between 2003-04 and 2005-06, to $47,805 million. A large proportion of this growth was due to higher exports prices, as the volume of exports rose by only 2.9% over the period. Growth in Western Australia's exports outstripped the growth in imports through the year to September quarter 2006. The value of Western Australia's exports rose by 32.8% ($3,629 million), compared to an increase in imports of 28.7% ($1,078 million). The main commodities contributing to the rise in exports were Non-monetary gold (up $1,004 million or 68.6%) and Iron ore and concentrates (up $946 million or 31.7%). On the other side of the ledger, imports growth was driven by solid increases in imports of Non-monetary gold (up $398 million or 62.1%) and Crude petroleum oils (up $249 million or 87.2%).
Western Australia's labour force continued to expand in the three months to November 2006, with the number of employed persons (trend) rising by 2,300 (0.2%) to 1,075,500 persons. This increase was less than half the rise of 5,700 employed persons (0.5%) in the previous three month period. Most of the current increase in Western Australia's employment was in full time employed males. The number of unemployed persons (trend) fell by 300 (0.8%) in Western Australia in the three months to November 2006, with unemployed males accounting for the entire decrease. Despite the falling number of unemployed persons in Western Australia, the unemployment rate (trend) remained unchanged at 3.4% between August and November 2006. By comparison, the national unemployment rate fell from 4.8% in August 2006 to 4.6% in November 2006. While the unemployment rate remained steady, the labour force participation rate fell for Western Australia, from 67.5% to 67.3% over the same period.
STATE ACCOUNTS
Gross State Product
Western Australia's volume measure of Gross State Product (GSP) rose by 4.9% in 2005-06. This was the second highest rate of growth in Australia along with Queensland. The Northern Territory recorded the strongest rate of growth of 7.5%, while the Australian Capital Territory (3.4%) and Tasmania also recorded higher rates of growth than Australia's GDP of 2.8%. Increases in New South Wales (1.4%), South Australia (2.2%) and Victoria (2.7%) were all below national average growth.
GROSS STATE PRODUCT, Western Australia
The increase in the current price measure of Western Australia's GSP was much higher than its volume rate of growth in 2005-06. The state's GSP in current prices rose by 15.9% compared to 4.9% in volume terms, and was the highest rate of growth across Australia. The discrepancy can mainly be explained by the higher prices received for resource commodities over the period.
Gross State Product per capita allows for the impact of population growth on movements in GSP. Western Australia recorded the second highest rate of growth in GSP per capita across Australia of 3.0%, behind the Northern Territory with 5.4%. Three other states or territories had growth rates in GSP per capita above the Australian average of 1.5%, including Queensland (2.7%), Tasmania (2.3%) and the Australian Capital Territory (2.3%). New South Wales had the weakest growth in GSP per capita of 0.5%.
Real Gross State Income
Real Gross State Income (RGSI) measures the real purchasing power of income generated in a state by taking into account changes in the terms of trade (i.e. the ratio of exports prices to imports prices). Western Australia's growth in RGSI per capita was almost three times the size of its growth in GSP per capita in 2005-06, 8.5% compared to 3.0%. Western Australia had the highest rate of RGSI growth per capita across the nation, followed by the Northern Territory (7.7%) and Queensland (7.0%). These states benefited the greatest from rising minerals and energy prices, and hence the higher terms of trade, as their contributions from mining to economic activity are much larger than in other states or territories.
GSP AND RGSI PER CAPITA, Chain volume measures - Western Australia
Industry composition of Total Factor Income
Western Australia recorded the strongest rate of growth in factor incomes across Australia with 16.9% in 2005-06, followed by the Northern Territory (14.0%) and Queensland (13.9%). Other states and territories had growth rates of between 4.5% and 7.1%, all below the growth in Australian factor incomes of 8.1%. In 2005-06, the major contributions to factor income growth in Western Australia were from the industries of Mining (55.5%), Construction (13.2%) and Property and business services (7.6%).
INDUSTRY CONTRIBUTION (TOP 10) TO GROWTH IN TOTAL FACTOR INCOME, Western Australia - 2005-06
Total factor incomes in Western Australia's Mining industry rose by $8,731 million (41.4%) in 2005-06, followed by Construction ($2,079 million or 31.4%) and Property and business services ($1,189 or 11.7%). The only industry to detract from total factor income growth was Communication services, down $40 million or 1.8%.
State Final Demand
Growth in Western Australia's domestic economy has continued to slow over the last three quarters. In trend chain volume terms, State Final Demand in Western Australia decreased from a growth rate of 3.8% in the December quarter 2005 to 0.7% in the September quarter 2006. Despite the deceleration, the rise of 0.7% in the current quarter was above the national average growth of 0.6%.
In seasonally adjusted chain volume terms, Western Australia's domestic economy recorded its first fall in more than four years. Western Australia's State Final Demand fell by 0.2% ($44 million) in the March quarter 2002 and it has fallen by 3.4% ($920 million) in the September quarter 2006. The recent decline follows a large increase in State Final Demand in the June quarter 2006 of 4.6% ($1,200 million). Across the states and territories, growth in State Final Demand ranged from -3.6% in Tasmania to 4.6% in the Northern Territory in the September quarter.
STATE FINAL DEMAND, Chain volume measures - Change from previous quarter
Western Australia's fall in State Final Demand of $920 million (3.4%) to $26,094 million in the September quarter 2006 was driven by lower private and public investment, and was partially offset by rising household consumption. Private business investment fell markedly for Machinery and equipment (down $596 million or 20.6%) and Non-dwelling construction (down $423 million or 12.5%) during the quarter. Non-dwelling construction was down mainly due to the completion of Woodside's $1.5 billion Enfield, Vincent and Laverda oil and gas project. Public investment also fell during the September quarter, decreasing by $213 million (16.6%), while Ownership transfer costs was another detractor, declining by $119 million (18.6%). A positive contribution to State Final Demand was made by Household final consumption expenditure, rising by $147 million (1.1%) in the September quarter. Other significant contributions came from investment on Intangible fixed assets (up $115 million or 25.3% - the result of a rise in petroleum exploration) and dwelling investment (up $99 million or 5.9%).
PRICES
Consumer Price Index
Quarterly growth in consumer prices decelerated in Perth in the latest quarter. The Consumer Price Index (CPI) for Perth rose by 1.1% in the September quarter 2006, down from growth of 1.8% in the previous quarter. Nationally, prices rose by 0.9% in the current period.
Perth's CPI growth continues to be driven by Housing costs. The price of purchasing a house in Perth rose by 2.9% in the September quarter 2006, accounting for 25.9% of the total rise in Perth's CPI. The prices of Rents (up 2.0%) and Property rates and charges (up 6.3%) have also risen substantially in the September quarter, comprising 7.6% and 5.9% of Perth's total CPI growth respectively. The rise in Property rates and charges follows an annual review of prices by State and local government authorities.
The other major contributor to Perth's CPI growth was Fruit prices, which increased by 16.0% in the September quarter, accounting for 18.2% of the rise in Perth's consumer prices. The rise in Fruit prices reflects strong price increases for bananas, following Cyclone Larry, with the average price of Australian bananas rising by 45.0% between the June and September quarters.
CONSUMER PRICE INDEX (ALL GROUPS), Change from same quarter previous year
Perth's CPI rose by 4.8% in through the year terms in the September quarter 2006. This was slightly up on the 4.7% increase in the previous period and well above the national rise of 3.9%. The rate of CPI growth recorded nationally remained above the upper limit of the Reserve Bank of Australia's (RBA) target range for inflation of 3%, prompting the RBA to raise official interest rates by 25 basis points for the second in time in four months to 6.00% in August 2006.
Wage Price Index
Western Australia's Wage Price Index (total hourly rates of pay excluding bonuses) rose by 1.3% in the September quarter 2006, the same result as in the previous quarter. Nationally, wages grew by 1.1% in the September quarter, following a rise of 0.8% in the previous period.
WAGE PRICE INDEX, Change from same quarter previous year
In annual terms, Western Australia's wages increased by 4.3% through the year to September quarter 2006, following a rise of 4.6% in the previous period. The reported industries recording the highest rates of wages growth in the current period were Mining (7.4%), Construction (6.6%) and Property and business services (5.0%). From an occupation perspective, the strongest wages growth was recorded for Managers and administrators, Professionals, and Tradespersons and related workers, all with 4.9% growth through the year to September quarter 2006. Annual wages growth eased nationally, from 4.2% in June quarter 2006 to 3.8% in the most recent period.
CONSUMPTION
Retail trade
In trend terms, retail turnover rose by 2.9% ($162 million) in Western Australia in the three months to October 2006, compared to the previous three month period. The rise was slightly up on the 2.8% ($155 million) increase in the three months to July 2006. It was also more than double the national rise in retail turnover of 1.4% in the last three months, a rate which had dropped from 1.7% in the three months to July 2006. It appears as though the recent interest rate increases by the Reserve Bank of Australia (RBA) have had less of an effect on consumer spending in Western Australia than across Australia as a whole. The RBA lifted official interest rates by 25 basis points in May (5.75%), August (6.00%) and November (6.25%) 2006.
MONTHLY RETAIL TURNOVER, Current prices
Growth in Western Australia's retail turnover in the three months to October 2006 was primarily driven by the industry groups of Other retailing (up $41 million or 8.3%) and Household good retailing (up $38 million or 3.6%). Other retailing includes items such as pharmaceuticals, cosmetics, toiletries, antiques and used goods, garden supplies, flowers, and watches and jewellery. All the other industry groups contributed to the rise in retail turnover in the state, with the most prominent being Hospitality and services (up $24 million or 3.4%), Food retailing (up $23 million or 0.9%) and Clothing and soft good retailing (up $22 million or 6.7%).
New motor vehicle sales
In trend terms, new motor vehicle sales have continued to rise over the past 10 months in Western Australia. There were 9,628 vehicles sold in Western Australia in November 2006, up from 8,726 vehicles in January 2006. Despite this increase, the rate of growth in new motor vehicle sales has decelerated over the last 5 months, from 166 vehicles (1.8%) in June 2006 to 24 vehicles (0.2%) in November 2006.
NEW MOTOR VEHICLE SALES
The number of new motor vehicles sold (trend) in Western Australia rose by 699 vehicles or 2.5% in the three months to November 2006, compared to the previous three month period. Nationally, sales of new motor vehicles rose by 1.1% over the same period. In Western Australia, the rise in vehicle sales was mainly in Passenger vehicles, which increased by 284 vehicles (1.8%) over the three months, while sales of Sports utility vehicles (up 250 vehicles or 4.5%) and Other vehicles (includes utilities, vans, trucks and buses) (up 165 vehicles or 2.5%) were also higher.
INVESTMENT AND FINANCE
Private new capital expenditure
After a lengthy period of strong growth, business investment in Western Australia fell by $23 million (0.5%) in trend chain volume terms in the September quarter 2006. Private new capital expenditure peaked at $4,438 million in the June quarter 2006 but fell to $4,415 million in the latest quarter. The decline in business investment was due to a fall in expenditure on Equipment, plant and machinery of $65 million (4.1%), while investment on Buildings and structures partially offset the decline, rising by $44 million (1.5%).
In seasonally adjusted chain volume terms, the decline in private new capital expenditure in Western Australia was much more pronounced, falling by $852 million or 17.6% in the September quarter 2006. The decrease was driven by both the reduced investment on Buildings and structures (down $534 million or 16.9%) and Equipment, plant and machinery (down $318 million or 19.0%).
PRIVATE NEW CAPITAL EXPENDITURE, Chain volume measures
In original current price terms, Western Australia's business investment fell by $1,075 million (20.7%) in the September quarter 2006 to $4,126 million. The decline was mainly attributable to Mining industry investment falling by $812 million (22.3%), while the other major industry groups of Manufacturing (down $135 million or 32.3%) and Other selected industries (down $128 million or 11.3%) also recorded falls.
Housing finance commitments
The number of dwellings financed in Western Australia has started to trend downwards in recent months, after an extended period of strong growth. The number of dwellings financed for owner occupation (trend) has fallen in each of the last five months, decreasing from a peak of 9,588 dwellings in May 2006 to 8,861 dwellings in October 2006. Coinciding with this downturn in housing finance has been the raising of official interest rates by the Reserve Bank of Australia in May (to 5.75%) and August (to 6.00%) 2006.
In the three months to October 2006, there were 27,185 dwellings financed (original) in Western Australia, 3,347 dwellings (11.0%) less than in the previous three month period. Non-first home buyers accounted for most of the decline, falling by 2,756 dwellings (10.5%), while First home buyers contributed the remainder, down by 591 dwellings (14.0%).
HOUSING FINANCE COMMITMENTS, Number of dwellings financed
The total value of dwellings financed (original) in Western Australia has also declined, falling by $570 million (8.9%) in the three months to October 2006. The value of dwellings financed by Non-first home buyers fell by $450 million (8.1%), greater than the fall of $120 million (13.4%) for First home buyers. Despite this, the average loan size for First home buyers declined more than for Non-first home buyers over the last three months. The average loan for First home buyers fell from $221,600 in July 2006 to $214,800 in October 2006 ($6,800), compared to a fall from $219,100 to $217,000 ($2,100) for Non-first home buyers.
CONSTRUCTION
Building approvals
The number of building approvals (trend) have continued to decline in Western Australia since peaking at 2,278 in February 2006. In the three months to October 2006, there were 6,380 dwellings approved for construction in the state, 319 (4.8%) less than in the previous three month period. The decline was mainly driven by a fall of 287 (5.3%) House approvals, while Other dwelling approvals fell by 32 (2.6%) over the period. Despite the downward trend, house approvals in Western Australia have remained at historically high levels, with only 66 (3.7%) less Houses being approved for construction in October 2006 (1,697) than at its peak in November 1999 (1,763), just prior to the introduction of the GST.
NUMBER OF DWELLINGS APPROVED, Houses: Trend
The value of building approvals (original) in Western Australia has also fallen in the three months to October 2006. New other residential building approvals fell by $108 million (32.2%) over the period, while New house approvals were down by $8 million (0.6%). The value of Non-residential building approvals were also lower over the last three months, falling by $72 million or 13.8%.
TRADE
Balance of trade
The value of Western Australia's trade surplus rebounded strongly in the latest period, increasing by 34.9% ($2,551 million) through the year to September quarter 2006. The rise was due to exports growth outstripping the growth in imports over the period. The value of Western Australia's exports rose by 32.8% ($3,629 million) through the year to September quarter 2006, compared to an increase in imports of 28.7% ($1,078 million). Western Australia's trade surplus reached $9,867 million in the September quarter 2006, up from $7,316 million in the same quarter of 2005.
VALUE OF WESTERN AUSTRALIA'S TRADE SURPLUS, Change from same quarter previous year
The increase in Western Australia's trade surplus through the year to September quarter 2006 was mainly the result of the state's trade balance improving with China (up $831 million), the United Kingdom (up $552 million), Viet Nam (up $465 million) and India (up $409 million). The largest decline in the state's trade balance was recorded by the United Arab Emirates, decreasing by $292 million.
Exports
The value of Western Australia's exports rose from $11,077 million in the September quarter 2005 to $14,706 million in the September quarter 2006 (up $3,629 million or 32.8%). The main commodities contributing to the rise were Non-monetary gold (up $1,004 million or 68.6%) and Iron ore and concentrates (up $946 million or 31.7%). Other significant increases were recorded in Combined confidential items (up $457 million or 26.3%), Crude petroleum oils (up $293 million or 18.8%) and Nickel (up $206 million or 253.5%).
Imports
The value of Western Australia's imports rose from $3,761 million to $4,839 million between the September quarters of 2005 and 2006 (up $1,078 million or 28.7%). The major commodities contributing to the increase were Non-monetary gold (up $398 million or 62.1%) and Crude petroleum oils (up $249 million or 87.2%). Imports of Civil engineering plant and equipment (up $68 million or 56.3%), Rubber tyres (up $44 million or 85.4%) and Motor vehicles for transporting goods (up $43 million or 31.9%) were also significant contributors to imports growth through the year.
MINING
Mineral and petroleum exploration expenditure
Mineral exploration continued to recover strongly in Western Australia in the September quarter 2006 from a period of decline throughout 2005 and into 2006. Expenditure on mineral exploration (trend) rose by 9.2% ($14 million) to $172 million in the September quarter 2006, following a rise of 6.8% ($10 million) in the previous quarter.
MINERAL EXPLORATION EXPENDITURE, Total minerals
In original terms, mineral exploration expenditure in Western Australia increased by $36 million (23.2%) to $190 million through the year to September quarter 2006. The major mineral driving the rise was Iron ore, which rose by $31 million or 85.0% through the year. Exploration also increased for Silver, lead, zinc (up $7 million or 411.8%), Gold (up $3 million or 4.4%), Copper (up $2 million or 95.7%) and Diamonds (up $1 million or 17.5%) over the period. Nickel, cobalt was the only major mineral to record a decline in exploration, falling by $5 million or 14.2% through the year to September quarter 2006.
Petroleum exploration expenditure (original) recorded a very large increase in Western Australia through the year to September quarter 2006, more than doubling to $290 million (up $155 million or 114.6%).
Mineral and energy production
The vast majority of minerals and energy produced in Western Australia recorded increases in production through the year to September 2006. The largest increases were recorded in Diamonds (up 38.8%), Zinc (up 22.2%) and Crude oil (up 14.3%). Production fell however for Nickel (down 4.3%) and Gold (down 2.4%) through the year.
TOURISM
Short-term arrivals on holiday
Western Australia recorded a decline in the number of holidaymakers arriving from overseas in the September quarter 2006. During this period there were 8,462 (16.0%) less overseas visitors to Western Australia than in the same quarter of 2005. The largest declines were from Singapore (down 3,315 or 37.2%), Japan (down 2,214 or 25.0%) and Malaysia (down 1,995 or 34.9%). There were, however, more holidaymakers coming from Hong Kong (up 174 or 12.8%) and Indonesia (up 161 or 10.3%).
Short-term departures on holiday
There was also a decline recorded in the number of Western Australians holidaying overseas in the September quarter 2006. There were 2,292 (2.4%) fewer Western Australians travelling overseas for a holiday during this period compared to the September quarter 2005. Western Australians mainly reduced their holiday travel to Indonesia (down 16,740 or 52.9%), following the Bali bombing in October 2005. Partially offsetting the decline were increases in Western Australians holidaying in Thailand (up 5,854 or 73.2%), the United Kingdom and Ireland (up 2,006 or 23.5%) and mainland Europe (up 1,713 or 25.2%).
LABOUR MARKET
Job vacancies
The number of job vacancies (original) in Western Australia rose by 1,400 (6.6%) to 22,600 in the August quarter 2006, the third successive quarterly rise. Job vacancies also increased by 5,700 (33.7%) through the year to August quarter 2006, driven entirely by Private sector vacancies.
Employment
The number of employed persons (trend) rose by 2,300 (0.2%) to 1,075,500 in Western Australia in the three months to November 2006, following growth of 5,700 persons (0.5%) in the previous three month period. Much of the rise in employment over the last three months was in full time employed males, increasing by 2,100 persons (0.4%) to 524,500. Female full time employment remained steady at 243,200 persons during the period. The rest of the rise in state employment was mainly in males employed part time, up an by estimated 300 persons.
EMPLOYED PERSONS, Total
Through the year to November 2006, the number of persons employed in Western Australia rose by 24,800 (2.4%) to 1,080,100 persons in original terms. The industries contributing most to the rise were Construction (up 15,300 persons or 15.4%), Retail trade (up 7,600 persons or 5.2%), Personal and other services (up 5,900 persons or 14.8%) and Property and business services (up 5,700 persons or 4.7%). From an occupation perspective, the main occupations driving employment growth through the year were Tradespersons and related workers (up 15,300 persons or 10.8%) and Intermediate production and transport workers (up 12,500 persons or 13.2%).
Unemployment
The number of unemployed persons (trend) in Western Australia fell by 300 (0.8%) to 37,900 persons in the three months to November 2006. This followed a decline of 1,900 unemployed persons (4.7%) in the previous three month period. Unemployed males accounted for the entire fall in the last three months. Despite the number of unemployed persons falling in Western Australia, the unemployment rate (trend) remained unchanged at 3.4% between August and November 2006. Nationally, the unemployment rate fell from 4.8% in August 2006 to 4.6% in November 2006.
UNEMPLOYMENT RATE
Participation
The size of Western Australia's labour force rose by 1,900 persons between August and November 2006 in trend terms. Interestingly, this was not reflected in the state's labour force participation rate (trend), which fell from 67.5% to 67.3% over three month period.
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