2012-13 Government Mid-year Financial Projections Statement

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2012-13 Government Mid-year Financial Projections StatementBusiness investment is forecast to peak in 2013-14, and to moderate slightly in theoutyears as major projects pass peak construction and transition to production. The flowof new project commencements is expected to remain strong compared to the historicalaverage, but this is unlikely to completely offset project completions given the alreadyvery high levels of business investment (see following figure).BUSINESS INVESTMENT IN WESTERN AUSTRALIAAnnual Levels, Chain Volume TermsFigure 6908070605040302010$ BillionActualsMid-year review2012-13 BudgetForecast01994-95 1997-98 2000-01 2003-04 2006-07 2009-10 2012-13 2015-16Source: ABS Catalogue 5220.0 and Department of Treasury.Note: Data are adjusted for the 1997-98 sale of the Dampier to Bunbury Natural Gas Pipeline.Government SectorPublic consumption and investment comprises spending by the Commonwealth, State andlocal governments.Public consumption in Western Australia increased by 5.5% in 2011-12. This was lowerthan forecast in the 2012-13 Budget due to weaker growth in local andCommonwealth government spending. Growth is expected to moderate to 3.5% in2012-13 before increasing to 4.25% in 2013-14, reflecting the expense growth projectionsfrom Chapter 1: Financial Projections.64
The Western Australian EconomyPublic investment increased by 9.4% in 2011-12, which is a significantly strongeroutcome than forecast in the 2012-13 Budget. This primarily reflects an increase in localand Commonwealth government investment. Public investment is expected to increaseby 1.5% in 2012-13, with weaker local and Commonwealth government investment partlyoffsetting an increase in State Government investment. The revised growth profile inpublic investment incorporates the Asset Investment Program projections provided inChapter 1: Financial Projections.International TradeExportsImportsMerchandise exports from Western Australia grew by 4.6% over 2011-12, and accountedfor around 46% of national exports. This was slightly weaker than expected due toproject delays, adverse weather conditions, and project shutdowns, which are oftennecessary to facilitate expansions to project infrastructure.Exports are expected to grow by 6.5% in 2012-13, supported by expansions in iron orecapacity and a ramp-up in production by the Pluto LNG project. Consistent with thisoutlook, resource export volumes have increased in 2012-13 to date. Exports are forecastto grow at a strong pace in the outyears (between 6% and 7% per annum), as iron ore andLNG projects transition from construction to production.Expansions in production capacity are expected to be the key driver of export volumesover coming years, rather than fluctuations in external demand. This reflects lowproduction costs for Western Australia’s capital-intensive iron ore projects relative tocurrent iron ore prices and overseas competitors (e.g. China’s domestic iron oreproducers). Softer demand from China since the 2012-13 Budget has been reflected inweaker iron ore export prices, rather than export volumes.Merchandise imports rose by 27.6% in 2011-12, reflecting strong demand for capitalitems in the resources sector. Imports are expected to continue to increase in 2012-13 and2013-14, fuelled by growth in household consumption and high demand for capitalmachinery and equipment. The flow of imports is expected to decline in 2014-15 and2015-16, in line with the expected moderation in business investment.Labour MarketEmploymentWestern Australia remains a key driver of employment growth at the national level(see figure below). Employment in the State grew by 3.7% in 2011-12, underpinned bylabour demand in the health care and social assistance, and mining industries. The currenthigh levels of employment are expected to support employment growth of 3.25% in2012-13, up from forecast growth of 2.75% in the 2012-13 Budget.65
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2012-13 Government Mid-year Financial Projections Statement

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