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 2005-06 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.