2012-13 Government Mid-year Financial Projections Statement

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2012-13 Government Mid-year Financial Projections StatementOverall, GSP is forecast to grow by a very strong 6.0% in 2012-13. Business investmentis again expected to be the key driver of growth in 2012-13, reflecting increases inspending for major committed LNG and iron ore projects. Household consumption willbe supported by above-average population growth, but expectations for a recovery indwelling investment have been pushed back slightly following a decline in 2011-12.Growth in export volumes is expected to pick up in 2012-13, with the level of exports in2011-12 weighed down by supply-side interruptions (e.g. adverse weather conditions, andproject delays and shutdowns).Economic growth in the outyears is expected to rebalance away from business investmentand toward exports, as spending for a number of large resource projects winds down from2013-14 onwards, and associated production volumes ramp up. The levels of businessinvestment are projected to soften slightly over the outyears, with resource firms taking amore cautious approach to investment decisions for new projects. As a result, State FinalDemand growth will moderate from its current high rates, but overall economic growth(as measured by GSP) is expected to remain close to trend due to strong growth in exports(see following figure).ECONOMIC GROWTHGross State Product and Gross Domestic ProductFigure 187%Western AustraliaAustraliaWestern AustraliaLong-run averageForecast65432101994-95 1997-98 2000-01 2003-04 2006-07 2009-10 2012-13 2015-16Source: Australian Bureau of Statistics (ABS) Catalogue 5220.0, Department of Treasury and Commonwealth2012-13 Mid-year Economic and Fiscal Outlook.High levels of business investment and above-average population growth haveunderpinned strong labour demand in Western Australia. Employment grew by a solid3.7% in 2011-12, with forecast growth for 2012-13 revised up to 3.25% (from 2.75% atbudget-time). However, the outlook for labour demand in the outyears has softened inline with the revised outlook for business investment, resulting in slightly loweremployment and wage growth over the outyears.56
The Western Australian EconomyInflation is also likely to be slightly lower than forecast at budget-time following subduedconsumer price growth in 2011-12.COMPONENTS OF GROSS STATE PRODUCTWestern AustraliaTable 12011-12 2012-13 2012-13 2013-14 2014-15 2015-16Actual%BudgetEstimate%Mid-yearRevision%ForwardEstimate%ForwardEstimate%ForwardEstimate%Demand and Output (a)Household consumption 6.6 4.5 5.25 4.75 4.5 4.25Dwelling investment -14.6 7.5 4.5 7.5 4.25 4.25Business investment 38.2 11.25 11.25 2.0 -2.5 -3.5Government consumption 5.5 4.0 3.5 4.25 3.25 3.5Government investment 9.4 -0.25 1.5 1.5 1.0 0.75State Final Demand (SFD) 14.2 6.75 7.0 3.75 1.75 1.25Merchandise exports 4.6 4.5 6.5 7.0 6.5 6.0Merchandise imports 27.6 12.5 12.0 4.0 -2.75 -6.0Net exports (b) -3.7 -1.5 4.0 8.25 10.5 10.5Gross State Product (GSP) (c) 6.7 4.75 6.0 5.0 4.25 4.25GSP per capita 3.7 2.4 3.2 2.5 2.0 1.9Nominal GSP 7.8 5.25 4.75 5.25 5.0 5.0Income (a)Terms of trade -1.5 -5.25 -7.25 -4.0 -3.5 -3.5Gross State Income (GSI) 6.6 2.5 1.25 2.75 2.25 2.25Labour marketPopulation 3.0 2.3 2.8 2.4 2.3 2.3Working age population (15-64) 2.8 2.0 2.4 2.0 1.9 1.8Employment 3.7 2.75 3.25 2.25 2.0 1.75Unemployment rate (d) 4.0 4.25 4.25 4.5 4.5 4.5Participation rate (15-64) (d) 80.2 81.25 81.0 81.5 81.5 81.5PricesConsumer Price Index (CPI) 2.2 3.5 3.25 3.0 3.0 3.0Wage Price Index (WPI) 4.3 4.5 4.5 4.25 4.25 4.25SFD deflator 1.6 1.75 2.5 2.25 2.25 2.5GSP deflator 1.1 0.25 -1.25 0.25 0.5 0.75Established house price index -2.3 6.7 4.7 5.7 5.5 5.8Other key parametersExchange rate (US cents/$A) 103.2 99.0 103.4 101.0 98.2 95.4Iron ore price ($US/tonne) (FOB) 137.0 127.3 118.4 109.8 107.2 104.5Crude oil price ($US/barrel) 95.0 104.5 89.3 90.4 89.3 87.8(a) Based on 2011-12 State Accounts data, released on 21 November 2012 (ABS Catalogue Number 5220.0), updated withthe latest quarterly State Final Demand data (for the September quarter 2012, released on 5 December 2012).(b) Net exports refer to international trade in both goods and services.(c) Forecasts for ownership transfer costs, international trade in services, balancing item components, and the statisticaldiscrepancy of the State Accounts are not separately reported.(d)Data expressed in terms of the annual average during the financial year.57
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