Ser­vice key to econ­omy

Pilbara News - - News - Rick Newn­ham Rick Newn­ham is the chief econ­o­mist for the Cham­ber of Com­merce and In­dus­try WA.

Boom to bust. It’s a sim­plis­tic state­ment but also the most ac­cu­rate de­scrip­tion of how WA’s busi­ness in­vest­ment, and con­se­quently the State’s econ­omy, went from un­par­al­leled growth to hit­ting the red in just a few years.

We know that busi­ness in­vest­ment is a crit­i­cal driver of eco­nomic pros­per­ity — when busi­ness in­vest­ment grows, it cre­ates a domino ef­fect through­out the econ­omy.

The re­sources boom took us to un­prece­dented heights, with busi­ness in­vest­ment reach­ing its peak in 2011-12 at $80 bil­lion a year.

You only need to look at house­hold dis­pos­able in­come from 200506 to 2015-16 to see that dur­ing the boom the av­er­age per­son had an ex­tra $48,000 to spend or save com­pared to what they would have had with­out it. That’s equiv­a­lent to re­ceiv­ing an en­tire ex­tra year of spend­ing money.

But as we know, in 2016-17 this all changed. Busi­ness in­vest­ment fell to its low­est rate since the start of the decade, fall­ing 28 per cent, and our un­em­ploy­ment rate grew to 6.2 per cent — well above the na­tional av­er­age of 5.7 per cent.

This fol­lowed the con­clu­sion of ma­jor LNG project con­struc­tion and iron ore in­vest­ment.

So, what was WA’s sav­ing grace? How did we avoid a re­ces­sion? In­creased ex­ports. If it weren’t for this growth in ex­port in­come, the Cham­ber of Com­merce and In­dus­try WA be­lieves that WA would be in a re­ces­sion.

This then begs the ques­tion, are we through the worst of it?

CCI be­lieves that WA is now 88 per cent of the way down the busi­ness in­vest­ment cliff. Once in­vest­ment re­turns to pos­i­tive ter­ri­tory and new jobs are added, we will see the econ­omy start to re­cover.

In­dus­try and govern­ment must how­ever recog­nise that ex­port growth will be short-lived.

That is why CCI has been call­ing on the WA Govern­ment to de­velop a new era of busi­ness in­vest­ment.

This in­cludes a new phase for our re­sources sec­tor.

CCI be­lieves that new op­por­tu­ni­ties will be fo­cussed on ser­vic­ing and main­te­nance.

Each of the multi-bil­lion dol­lar projects that have been con­structed will need to be ser­viced, which for WA will mean, on av­er­age, one ma­jor turn­around per year.

En­sur­ing that taxes, fees or levies on busi­ness are not raised will also be crit­i­cal to re­store con­fi­dence and em­power in­dus­try to cre­ate jobs.

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