No. 3 - Department of Treasury - The Western Australian Government

Western Australian Economic Summary2006 No.3The United Kingdom has also emerged as a major destination for the State’sexports. Exports to the United Kingdom increased by $518.9 million over theperiod and now accounts for 7.6% of the Western Australia’s total exports.Most of the rise in exports to the United Kingdom has been driven by goldexports 1 . Over the September quarter 2006, gold exports to the UnitedKingdom rose by $516.6 million.ImportsMerchandise imports into Western Australia grew by 28.8% (or $1.1 billion)over the September quarter 2006, when compared to the same period a yearearlier. Imports of gold (mainly for refining and re-export – see footnote 1 onprevious page) made the largest contribution to growth over the period,increasing by 62.1% to contribute 10.6 percentage points to the 28.8%increase in overall import growth. Strong growth in business investment inthe State resulted in plant and equipment imports also making a significantcontribution to growth (6.8 percentage points) in Western Australia’simports, increasing by 25.6% (or $257.2 million) over the same period.Over the year to September 2006, the nominal value of merchandise importsin Western Australia grew by 38.2%. Nationally, the value of merchandiseimports grew by a more moderate 12.7% over the same period.International Economic TrendsThe International Monetary Fund (IMF) reports buoyant global economicconditions in its September 2006 World Economic Outlook. The reportforecasts global economic growth in 2006 and 2007 above the long-termtrend, at 5.1% and 4.9% respectively 2 .The IMF identifies the main risks to these forecasts as a further tightening ofmonetary policy by central banks in response to increasing inflationarypressures, rises in the price of oil and a slowing housing market leading toweaker economic growth in the USA.Interest rates in the United States, United Kingdom and Japan have risen in2006 and are forecast to rise further in coming quarters, even thoughinflationary pressures have eased slightly (with oil prices falling from peaksof US$75 per barrel in July to below US$60 recently). Economic growth inthe United States has weakened since the beginning of 2006, but the presentglobal economic expansion is probably sufficiently broadly-based to be fairlyresilient to the effects of a United States slowdown 2 . Growth in Europe haspicked up, China continues to grow rapidly, and growth in emergingeconomies has been solid.1 The United Kingdom (and in particular, the London Bullion Market Association) is aparticularly large market for gold, and often acts as a ‘sink’ for the State’s goldexports, when world demand from other countries is low (even though it may notnecessarily be a final destination for gold exports).2http://www.imf.org/external/pubs/ft/weo/2006/02/index.htm, “WorldEconomic Outlook September 2006. “52 Department of Treasury and Finance