All is not well in WA. As a once-in-a-generation mining boom enters the production phase and falling commodity prices threaten employment, State revenue and investment, sober reflection on the future of our economy is necessary.
Although mining and extractive industries will continue to provide the bedrock, the State needs a more diverse and innovative economy.
The resources sector has underpinned the State’s recent prosperity, shielding us from the worst of the global financial crisis from 2008 onwards, preventing a sharp rise in unemployment and supporting a thriving services sector. Yet even its biggest cheerleaders would admit that excessive reliance on the resources industry for so much of our economic growth is unhealthy. The gloomy forecast for export commodities provides additional impetus to diversify.
From an industrial perspective, a focus on technology and innovation is the smart policy direction. The State Government (and business) would be ill-advised to follow glib suggestions to seek growth by driving down the wages and conditions of West Australians.
Competing with developing economies in mass manufacturing or low-skill industries in a race to the bottom is a mug’s game. Australia’s labour productivity is relatively high and the substantial sacrifices made by working Australians would likely be in vain in the long term.
A better strategy involves identifying and investing in areas where WA has a natural advantage. Our natural environment is an obvious strength.
Tourism in WA needs fostering. Tourism WA estimates the industry employs 7 per cent of our workforce and contributes $8.3 billion to our economy. Yet few stakeholders would deny that much more could be done to promote our State’s breathtaking natural attractions and showcase our indigenous heritage.
WA gets more sun and wind than any other State in Australia. We have tentatively begun to harness these forms of renewable energy at scale, though more investment is required. Current projects include the 209 megawatt Collgar Wind Farm in Merredin, the Greenough river solar farm, and the CETO wave energy plant on Garden Island, which was designed here in WA.
Each of these projects is playing a significant role in supplying energy in WA and will only increase in capacity in coming years.
Clean technology is also exportable to the growing number of countries seeking to reduce carbon emissions while also providing their citizens with reliable power and fresh water.
Similar projects can and should be encouraged through public investment in the research and economic infrastructure necessary for success.
WA is also well positioned to expand our production of so-called “elaborately transformed manufactures”. Aircraft parts, medical instruments, and civil engineering and telecommunications equipment feature highly in our leading manufacturing exports.
These types of value-added and technologically intensive products offer our best chance to compete internationally.
In the immediate environment, both lower energy costs and the lower dollar will assist in making our exports more competitive.
Although the need for inclusive growth is often overlooked, it is vital to ensure that our prosperity benefits all West Australians.
In order to achieve this, economic growth needs to bring with it high-skilled and high-paying jobs and be delivered hand-in-hand with strong services.
One example of ensuring local benefits from our major industries is the 15 per cent gas reservation policy. This reservation has ensured our gas resources are suitably developed, but that ordinary West Australians are considered at the same time.
To realise these goals, governments need to get better at making decisions for the long term.
In an increasingly volatile political climate, where electoral support is fickle and party leaders are increasingly viewed as replaceable, this may seem difficult.
But a government that was explicit and imaginative in its goals, willing to try new things (even though not all of them would succeed), and that sought to invest in the long-term prosperity of the State would be a sight for sore eyes for most West Australians.
Martin Drum is a senior lecturer in politics and international relations at the University of Notre Dame (WA). Varun Ghosh is a solicitor at King & Wood Mallesons in Perth