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WA economy a shot in arm during lengthy lockdown

The Federal Government has hailed WA for giving the Budget a “good boost”, as national gross domestic product contracted by a smaller-than-expected 1.9 per cent in the September quarter.

Economists had tipped a 2.5 per cent contraction.

The WA economy lifted 0.6 per cent in the quarter, Australian Bureau of Statistics data released on Wednesday showed, with household expenditure increasing.

Treasurer Josh Frydenberg said WA’s contribution to the national bottom line was driven primarily by a higher-than-expected iron ore price.

“We welcome the contribution from WA’s strong mining sector,” he said.

“We have sensitivity analysis in the Budget about what the increase in the iron or price means to our Budget bottom line, but it is substantial.”

Iron ore at the start of the September quarter was priced at almost $US200/t and ended the three-month period at $US94/t. It is now tracking at about $US88/t

“There has been a good boost to the Budget from the higher-than-expected iron ore prices,” Mr Frydenberg said.

In WA, household consumption was up 1.9 per cent, which the ABS attributed to stronger consumer sentiment, hosting events such as the AFL Grand Final, and spending on goods and services.

Costs from property transfer costs rose 11.6 per cent, which the ABS said reflected “ongoing strength in both transfers and stamp duty”.

Private business investment decreased 1.5 per cent, particularly new engineering construction and a one per cent decrease in machinery and equipment from a fall in mining business investment.

Chamber of Commerce and Industry WA chief economist Aaron Morey said the larger trend showed WA’s economy was still performing strongly.

He said a slowdown in business investment in the quarter could in part be attributed to some firms bringing forward financial commitments to the June quarter to finalise before the end of the financial year. Mr Morey also pointed to the slip in the iron ore price, though still above Budget forecasts.

WA’s 0.6 per cent increase in quarterly final state demand was the lowest of all States not in a prolonged lockdown; with South Australia up 1.4 per cent, Queensland up 1.8 per cent and Tasmania up 4.2 per cent over the quarter.

“This is a marginal change within a quarter, the WA overall economic story since COVID is one of strength,” Mr Morey said.

“There’s a massive capital stock in mining which needs to be maintained and needs to be invested in. Maintaining that activity means significant jobs for Western Australians.

“On the whole, WA’s economic figures are pretty good.”

Mr Frydenberg said the national accounts “confirmed the enormous economic cost of lockdowns”.

“Around 13 million Australians were in lockdown during the September quarter … It is the third largest quarterly contraction on record following the 6.8 per cent fall in the June quarter last year and a 2 per cent fall in the June quarter in 1974.

“Today’s national account numbers are very much a lockdown story.”

NSW, Victoria and ACT were all in lockdown for the majority of the September quarter.

Deloitte Access Economics partner Chris Richardson said the national recovery from the Delta variant had been fast, and Australian families and businesses were “getting better at juggling COVID”.

“The national accounts make for good fish and chip wrapping paper,” he said. “They’re old news. The recovery from Delta has been even faster than our recovery through to mid-2021.”

Mr Frydenberg said the figures were better than expected and that consumer spending had lifted since the lockdowns.

“With millions of households in lockdown, the savings ratio spiked to 19.8 per cent. This is money that will be spent across the economy as restrictions are eased and Australians go about their daily life,” he said.

“The Australian economy is recovering strongly and nowhere is this more clearly shown that in the labour market, with 350,000 jobs coming back since the start of September, job ads are more than 30 per cent higher than going into the pandemic.”

But he admitted there would likely be disruptions in the future.

“Omicron is not the first, and is unlikely to be the last variant that we face,” he said.

“But we must hold our nerve and cool heads must prevail.”

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