2012-13 Government Mid-year Financial Projections Statement

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2012-13 Government Mid-year Financial Projections StatementEMPLOYMENT GROWTHAnnual and long-run averageFigure 76543%Western AustraliaAustraliaWestern AustraliaLong-run average = 2.6%AustraliaLong-run average = 2.0%Forecast210-11994-95 1997-98 2000-01 2003-04 2006-07 2009-10 2012-13 2015-16Source: ABS Catalogue 6202.0, Department of Treasury and Commonwealth 2012-13 Mid Year Economic and Fiscal Outlook.Employment growth is expected to soften over the outyears as resource investment peaksand growth in domestic demand moderates. Employment is forecast to grow by 2.25% in2013-14, and gradually moderate over the remaining outyears to reach 1.75% in 2015-16.Notably, these forecasts are still stronger than those for the national economy.UnemploymentWestern Australia’s unemployment rate averaged 4.0% in 2011-12, and remainssubstantially lower than the national average (5.2% in 2011-12). The averageunemployment rate in 2012-13 to date remains low, with strong employment growthlargely absorbing increases in the labour supply resulting from high levels of immigrationto the State.The unemployment rate is expected to average 4.25% in 2012-13 consistent with budgetexpectations. It is forecast to rise to 4.5% in the outyears, as the peak in businessinvestment leads to softer growth in the domestic economy and an associated moderationin labour demand. The participation rate of people aged 15-64 is projected to rise in2013-14, and remain constant over the last two outyears.Wages and EarningsThe State’s Wage Price Index (WPI) grew by 4.3% in 2011-12, consistent with the 4.25%estimate in the 2012-13 Budget. Growth in the WPI is expected to strengthen to 4.5% in2012-13 based on relatively strong growth in the September quarter 2012 and tight labourmarket conditions.66
The Western Australian EconomyWage growth is forecast to moderate slightly to 4.25% in 2013-14 and remain steady atthis rate over the remaining outyears, in line with trend growth. This is consistent with asoftening in labour demand, and a slightly higher unemployment rate.InflationConsumer Price IndexRisksPerth’s Consumer Price Index (CPI) increased by a moderate 2.2% in 2011-12, followinggrowth of 2.8% in 2010-11. The subdued growth in 2011-12 was consistent with aneasing in inflationary pressures at the national level over the past year.Consumer prices in Perth are forecast to rise by 3.25% in 2012-13 (compared to the2012-13 Budget estimate of 3.5%), reflecting the introduction of the carbon tax,above-average population growth and reasonably strong wage growth.Perth’s CPI is forecast to grow by around 3.0% in the outyears (slightly lower than thebudget forecast of 3.25%). Growth in 2015-16 incorporates an estimated 0.2 percentagepoint increase to reflect the planned introduction of an Emissions Trading Scheme.These forecasts are broadly consistent with the Reserve Bank of Australia’s latestprojections for headline inflation at the national level (including the estimated carbon taximpact).Global RisksDownside risks to global growth have become more elevated over the past year, reflectinguncertainty surrounding the policy responses to the economic challenges faced by theUnited States and the euro area. Prospects for the euro area remain dependent ondecisions regarding a banking union, recapitalisation of banks, structural reform and fiscaladjustment. Policy uncertainty also remains a key risk in the United States, with a fragilerecovery now being supported by a third round of quantitative easing.Bond yields in the euro area have broadly eased since the middle of 2012. Investors’concerns appear to have been allayed, at least temporarily, by the European CentralBank’s preparedness to intervene in credit markets. Nonetheless, little progress has beenmade towards a long term solution for the sovereign debt problems faced by theseeconomies, leaving the euro area susceptible to ongoing volatility.The implications of these global risks for Western Australia will largely be determined bygrowth prospects in China and uncertainty in local and regional financial markets.67
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