2012-13 Government Mid-year Financial Projections Statement

More documents

Recommendations

Info

2012-13 Government Mid-year Financial Projections StatementIndustrial production in China has clearly slowed over the past year. As expected, theadjustment to this softening in demand has occurred through lower commodity prices.The immediate risk to domestic demand in Western Australia has been offset to someextent by the large pipeline of major resource projects that are already under construction.These projects are difficult to wind back once commenced, particularly for major LNGprojects which account for over 85% of the value of resource projects under construction.In the long run, the continued industrialisation of China is likely to support externaldemand. A rebalancing of China’s growth away from investment could assist withensuring more sustainable growth in future years.Domestic RisksThe decline in dwelling investment in 2011-12 was greater than forecast in the2012-13 Budget, despite evidence of a pick-up in underlying housing demand.A recovery in housing demand is expected to support established house prices in 2012-13and flow through to a pick-up in dwelling investment. However, there is a risk thatconditions may remain subdued due to the large outstanding stock of household debt andrelatively low (but improving) housing affordability 1 .The $US/$A exchange rate remains high by historical standards despite weaker globaldemand and declines in commodity prices over the past year. This reflects a relativelyweak US dollar, interest rate differentials between Australia and other countries, andforeign demand for Commonwealth Government securities. The strong Australian dollaracts as a constraint on the State’s royalty revenue, as most commodity exports are pricedin US dollars. It also reduces the cost competitiveness of new resource projects inWestern Australia relative to other countries. These disadvantages are partly offset bylower import prices, which increase the purchasing power of consumers.Western Australia’s population growth remains stronger than the rest of Australia,supported by high levels of net overseas migration. This presents some upside risk togrowth, by potentially boosting household consumption and inflation, and flowingthrough to housing demand and higher house prices. Strong population growth has alsoincreased demand for services and infrastructure provided by the Western Australianpublic sector.Western Australia’s strong economic performance over the past year seems to beinconsistent with recent indicators of weaker consumer and business sentiment at theState level. Measures of consumer confidence have been relatively weak over the pastyear, despite strong growth in retail sales in Western Australia and cuts in the cash rate bythe Reserve Bank of Australia, totalling 175 basis points since October 2011. Businesssentiment in Western Australia also appears to have moderated, with resource firms beingmore cautious following recent volatility in commodity prices.1While housing affordability has improved in recent years, it is still relatively low by historical standards. Housing affordabilityhas been improving on the back of modest average annual growth in house prices (as measured by the ABS established houseprice index) of 0.6% over the past five years (from 2007 to 2012), compared to growth in average weekly earnings of 6.2%per year. By contrast, house prices in the previous five years (using the latest data) grew at an unsustainable rate of 20.0%per year, compared to earnings growth of 6.4% per year.68
The Western Australian EconomyThere is a risk that these indicators could translate into weaker economic activity,resulting in softer household and business demand than anticipated by the forecasts.Western Australian’s Contribution to the National EconomyThe Western Australian economy makes a larger contribution to Australia’s nationaleconomy relative to its 10.6% share of the national population.In 2011-12, Western Australia’s GSP accounted for 16.2% of Australia’s GDP, withthe State accounting for 27.6% of national business investment and 14.2% of nationaldwelling investment. State Final Demand accounted for 13.7% of national finaldemand despite a contraction in the State’s dwelling activity. In the external sector,Western Australia represented 46.1% of national exports and 15% of national imports.Reflecting the strength of the State’s economy, Western Australia was a key driver ofpopulation and employment growth at the national level, accounting for 22.1% and36.8% of national population growth and employment growth respectively(see following table). The State’s unemployment rate was substantially lower than thenational average.Table 3COMPONENTS OF GROSS STATE PRODUCT, AND LABOUR MARKET2011-12Demand and Output (a) WA Australia WA Share(nominal)% % %Household Consumption 6.6 3.3 10.6Dwelling Investment -14.6 -3.7 14.2Business Investment 38.2 22.0 27.6Government Consumption 5.5 3.4 10.3Government Investment 9.4 -4.1 11.5State Final Demand (SFD) 14.2 5.3 13.7Merchandise Exports 4.6 4.6 46.1Merchandise Imports 27.6 11.4 15.0Net exports -3.7 -37.9Gross State/Domestic Product (GSP/GDP) 6.7 3.5 16.2Labour Market WA Australia WA Share%Population 2,399,447 22,542,095 10.6Population growth (levels) 69,912 316,952 22.1Population growth (%) 3.0 1.4Employment 1,267,752 11,443,524 11.1Employment growth (levels) 45,220 122,734 36.8Employment growth (%) 3.7 1.1Unemployment rate (%) 4.0 5.2Participation rate (%) 68.6 65.4(a)Based on 2011-12 State Accounts data, released on 21 November 2012 (ABS Catalogue Number 5220.0), updatedwith the latest quarterly State Final Demand data (for the September quarter 2012, released on 5 December 2012).(b) Annual average change over the year to March 2012.69
Page 1:
2012‐13GovernmentMid‐year Finan
Page 4 and 5:
2012-13 Government Mid-year Financi
Page 7:
ForewordThis Government Mid-year Fi
Page 10 and 11:
Page 12 and 13:
Page 14 and 15:
Page 16 and 17:
Page 18 and 19:
Page 20 and 21:
Page 22 and 23:
Page 24 and 25:
Page 26 and 27: 2012-13 Government Mid-year Financi
Page 126 and 127:
Page 128 and 129:
Page 130 and 131:
Page 132 and 133:
Page 134 and 135:
Page 136 and 137:
Page 138 and 139:
Page 140 and 141:
Page 142 and 143:
Page 144 and 145:
Page 146 and 147:
Page 148 and 149:
Page 150 and 151:
Page 152 and 153:
Page 154 and 155:
Page 156 and 157:
Page 158 and 159:
Page 160:
show all

2012-13 Government Mid-year Financial Projections Statement

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?