The global acceleration toward decarbonisation will be a significant boost to Western Australia’s critical and battery minerals sectors, according to the Chamber of Commerce and Industry WA’s (CCIWA) Outlook report.
However, CCIWA chief economist Aaron Morey believes there is an over-reliance on the mining sector which demands a significant refocus on diversification.
CCIWA’s biannual economic Outlook report is the only WA-based non-government forecast of the state’s economy, with all growth rates calculated in terms of year-on-year growth, comparing four quarters of data.
Morey said strong commodity prices and upcoming projects like Scarborough and Pluto 2 will see business investment accelerate from 2 per cent this year, to an expected 7.5 per cent in 2022/23.
“With the State Government’s management of COVID-19, mining and consumer activity has continued comparatively freely, enabling the benefits to flow through the economy,” he said.
“Mining has reached a record 47 per cent share of WA’s economy, an over-reliance which demands significant refocus on diversification.”
According to the Outlook report, soaring commodity prices, robust global demand and government tax concessions helped to underpin a sharp rise in Western Australian business investment during the first half of 2021.
“WA mineral exploration spending remains solid. ABS (Australian Bureau of Statistics) data suggests total deposit expenditure in WA hit a record high in September 2021 at $553 million,” the report stated.
“Over the longer term, the global acceleration toward decarbonisation and associated uptake of electric vehicles will support growth in WA’s critical and battery minerals sectors.
“Key risks to the outlook include worsening trade disputes with China, prolonged disruptions to global supply chains (pushing up operating costs), and ongoing labour shortages.”
According to the report, iron ore export volumes are expected to hold firm in 2022-23, with China signalling a pull-forward of policy easing to support domestic economic growth this year.
“All up, we expect exports to decline marginally (- 0.5 per cent ) in 2021-22 before accelerating to 1.75 per cent in 2022-23 as international students and foreign tourists return to WA shores,” it stated.
However, Morey said the state must be prepared for commodity markets to one day turn.
“Only businesses and governments with the nerve to take on global markets, embrace skilled migrants and seize new trade and investment opportunities will prosper in a post-COVID world,” he said.
“Those who remain insular will be left behind, and WA has been slow out of the gates. We should reform the inefficient taxes constraining our dynamism and diversification, like payroll tax and stamp duty.”
The full CCIWA Outlook report can be found here.