I was in the Wild West recently, and the big state has a big export boom going on. See house prices soar.
I was in the Wild West last week, speaking at a mining conference in Perth and taking a look around at the Sandgroper state. There’s no doubt about it – the place is booming from Kununurra to Kalgoorlie.
Thanks to the resources boom, Western Australia is exporting its head off, with a resulting boom in growth, employment and corporate profits. Jobs are a-plenty in the west, and the WA unemployment rate is as low as 2.7% (compared to the national average of 4.4%) which is possibly as close to full employment as you can get.
Of course, WA is rich in resources and thanks to demand from China, India and the rest of Asia, the state is leading the pack. However, it’s not just the mining that is booming; the WA boom is pretty broad based.
For example, retail and motor vehicle sales are well above the national average. Even in a mining town like Kalgoorlie, the locals explained to me that tourism, education and community services were also growing as the population expansion created demand for additional services and employment sources in the goldfields area. The west is also enjoying a tourist boom on the coast with Monkey Mia, the Kimberlys and Margaret River all doing their bit.
Of course, the overall Western boom has its pressure points too – in housing and in the labour market. When I was at Adelaide University in the 1980s, one of my classmates actually flew to Perth to buy a house with his brother because housing was so cheap relative to South Australia. Admittedly he was a mature age student with ties to the SA racing fraternity (and is now a leading forecaster in the Commonwealth Treasury) but it still demonstrates how cheap Perth housing was back then.
Not any more, thanks to the boom. According to the Reserve Bank, the Perth median house price level is getting close to Sydney, although the RBA expects it will stabilise. Because of issues of affordability, the WA Government has abolished stamp duty for first home buyers (up to a $500,000 purchase price limit) which is an important measure given the shortage of rental properties and soaring median rental prices.
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On the labour market front, WA is being hit by skill shortages, and job vacancies are ahead of the national average. Naturally the population is growing as both skilled and unskilled workers head north and west to take advantage of bigger pay packets on offer.
One consequence of this booming labour market is that if the West Coast Eagles make the AFL Grand Final again and tickets are scarce, don’t try and compete with the visiting Western Australian supporters in the scalping stakes around the MCG; they’ll easily outbid you. The best you can hope for is that there’ll be some improvements in WA waterfront productivity that will help the Fremantle Dockers put some pressure on the Eagles come September, as a good boom always need a bit of competition.
*Tim Harcourt is chief economist of the Australian Trade Commission and author of Beyond Our Shores – see: www.austrade.gov.au/economistscorner
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