2012-13 Government Mid-year Financial Projections Statement

CHAPTER 3The Western AustralianEconomyHIGHLIGHTSWestern Australia’s economy continues to support the growth of the nation.Business investment remains the key driver of growth in domestic demand, and isunderpinning above-average population growth and strong labour demand.In the medium term, economic growth is expected to rebalance away from businessinvestment and towards exports, as major resource projects transition fromconstruction to production.With the exception of payroll tax (see Chapter 1), Western Australia’s strongeconomic growth is not flowing through to the State’s revenue bases. In 2011-12,the State’s economy grew by a record 6.7% (compared to average growth of 4.8%per annum over the past decade), while growth in general government sectorrevenue was just 5.5% (compared to average growth of 8.5% per annum over thepast decade).OverviewThe immediate outlook for the Western Australian economy has improved since the2012-13 Budget due to stronger than expected business investment and above-averagepopulation growth over the past year. Western Australia’s real Gross State Product (GSP)grew by a record 6.7% in 2011-12, which was the strongest economic growth of all Statesand Territories, and compares to national Gross Domestic Product growth of 3.5%.Nonetheless, slower growth in China and declines in iron ore prices have contributed to aweaker outlook for the terms of trade (the ratio of export prices to import prices).55