Chamber laments WA pessimism
Entrenched consumer and business pessimism in WA is hard to understand given key economic indicators show the state is tracking well, the Chamber of Commerce and Industry says.
Chief economist John Nicolaou told a briefing in Perth that business sentiment had been in negative territory since 2012, while consumer confidence had taken a battering since January.
"We have become a far more pessimistic society than we have been at any other time," Mr Nicolaou said.
Consumer spending was growing at an "anaemic" rate as households fretted about the labour market and political environment, he said.
Businesses were also concerned about uncertainty in the political environment and were holding back on recruitment as a result.
It was surprising only 18 per cent of WA businesses were confident about the economic outlook, compared to 21 per cent in Europe and 40 per cent in the US.
"We're keen to see that narrative change," Nicolaou said.
There was still a lot of business investment in the state, exports were rising, labour was relatively abundant and wages growth had eased.
But youth unemployment remained too high and there had been a weak policy response to the state's unstable budget position, with the WA government's expenditure a bigger worry than revenue volatility, namely iron ore price fluctuations.
The Chamber expects the iron ore price will move back above $US100 per tonne by the end of the year, up from a five-year low hit this week of sub-$US78/t.
If the iron ore price and exchange rate stay at the current level, the WA government's projected $175 million surplus for the current financial year could become a $1.8 billion deficit. Working to a consensus of analyst assumptions, the deficit would be $660 million, Mr Nicolaou said.
The state government recently conceded it could not promise a surplus in 2014/15.
Public sector reforms needed to continue because such budget outcomes could not be tolerated, Mr Nicolaou said.
"But we do see a growth trajectory emerge over the next nine months."
The Chamber is forecasting economic growth of around four per cent over the next two years.
"They aren't headline grabbers by any means, but they're a boringly good set of numbers overall," Mr Nicolaou said.
There was reason to be upbeat, with the WA economy maturing from its previous boom-bust cycles.
"For an economy like WA to be transitioning so well out of such a massive investment phase is something that we should celebrate rather than be overly concerned about."
