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In seasonally adjusted chain volume terms, State Final Demand increased by 0.7% ($142 million) to $21,185 million in the September Quarter 2004. The key drivers of growth in the quarter were:
The main detractor from growth in State Final Demand, in the September quarter, was investment by State and local public corporations, down $322 million (53.0%). This followed a high level of investment in the state's water and gas utilities in the June quarter.
Consumer Price Index
Growth in Perth's Consumer Price Index (CPI) eased to 0.7% in the September Quarter 2004, following an increase of 1.0% in the previous quarter. Despite this decline, prices growth in Perth remained above the national increase of 0.4%.
The main contributor to Perth's CPI growth in the September Quarter 2004 was Housing, which increased by 1.8%. The rise in housing prices was driven by increases in construction costs and property rates and charges, resulting from the annual review of charges by state and local government authorities. Other notable contributions were: Miscellaneous items (up 2.6%), mainly due to an increase in the cost of child care; Alcohol and tobacco (up 1.1%), largely the result of an adjustment in Federal excise and customs duties from 1 August 2004; and Transportation (up 0.5%), reflecting the increased cost of automotive fuel.
Detracting from prices growth in Perth in the September Quarter 2004 were: Clothing and footwear (down 0.6%), predominantly the result of prices falling for clothing accessories and jewellery; Household furnishings, supplies and services (down 0.3%), mostly from a decline in the cost of furniture and household supplies; and Health (down 0.5%), due to the cyclical effect of the Pharmaceutical Benefits Scheme safety net on pharmaceutical prices.
Perth's CPI rose by 2.5% in the September Quarter 2004, compared to the September Quarter 2003. Nationally, the CPI rose by 2.3% over the same period - within the Reserve Bank of Australia's (RBA) target range of 2.0%-3.0%. The RBA expects inflation to remain within the target band in the near term, with leading indicators for the housing sector showing an easing in activity. However, high oil prices, the renewed pick-up in global economic conditions and rising manufacturing prices could pose a threat to the inflationary outlook in the longer term.
Wage price index
Western Australia recorded strong wages growth in the September Quarter 2004, with the state's quarterly index of total hourly rates of pay (excluding bonuses) increasing by 1.7%. This was the largest quarterly increase since the March Quarter 2001, and was above the national increase of 1.3% for the same period. Of the selected industries for Western Australia, wages growth was highest in Personal and other services (2.5%) and Manufacturing (2.1%). The occupations to record the largest wages growth over the period were Elementary clerical, sales and service workers (2.6%) and Labourers and related workers (2.4%). These increases partly reflect salary increases taking effect for the new financial year, as well as the Safety Net Review decision to raise full-time minimum award
wages by $19 per week.
In the 12 months to September 2004, Western Australia recorded wages growth of 3.5%, equal to growth at the national level. The selected industries to record the highest wages growth in the year to September were Manufacturing (5.1%) and Personal and other services (4.1%). Labourers and related workers recorded the highest annual wages growth among the selected occupations (4.1%).
Annual growth in the Australian level Wage Price Index remains within the Reserve Bank of Australia's target range of 3.5%-4.5%. However, economic commentators have cautioned that shortages in the availability of skilled labour are becoming a constraint on further economic expansion within the state, and that this may translate into wages growth in the longer term.
New motor vehicle sales
Sales of new motor vehicles in Western Australia (trend) increased for the eleventh consecutive month in November 2004, rising by 1.1% to 8,183 vehicles - the highest level of sales since the series commenced in January 1994. The recent strength in new motor vehicle sales has been supported by a strong $A, lowering the price of imported vehicles, and high levels of consumer confidence. Sales of new motor vehicles in the state have increased at an average monthly rate of 1.8% (143 vehicles) since July 2004, double the rate of the previous five month period, and well above the national average of 0.1%.
Recent growth in Western Australia's new motor vehicle sales (trend) has been driven by sales of Passenger vehicles, increasing by an average of 2.1% (96 vehicles) per month over the three months to November 2004. Sales of Passenger vehicles accounted for almost three quarters (71.2%) of the increase in new motor vehicles sold during the period, with Sports utility vehicles and Other vehicles accounting for 21.2% and 7.6% respectively.
Retail turnover in Western Australia (trend) continued to grow strongly in the three months to October 2004, increasing by 1.8% over the previous three month period - compared to 0.7% growth nationally. Retail spending in the state continued to be supported by strong consumer confidence, brought about by sustained low levels of unemployment and inflation and low interest rates. Recent tax cuts, increases in the Family Tax Benefit, and rising wealth from higher property prices have also helped sustain retail turnover during the period. However, the effect of these factors may be declining given a slowing in the monthly rate of growth in retail spending, which dropped from 0.9% in June 2004 to 0.3% in October 2004.
The main contributors to growth in retail turnover, over the three months to October 2004, were spending on Other retailing (including pharmaceuticals, cosmetics, antiques, garden supplies and jewellery), up $23.8 million (5.0%); Household good retailing, up $21.6 million (2.7%); and Food retailing, up $18.2 million (0.9%). Spending on Hospitality and service industries was the only detractor from growth, down $9.7 million (1.6%).
In trend chain volume terms, Western Australia's retail turnover for the September Quarter 2004 increased by 2.1% to $4,976.5 million - the largest increase of all the states and territories, and well above the 1.1% growth recorded nationally.
INVESTMENT AND FINANCE
Private new capital expenditure
In trend chain volume terms, business investment in Western Australia rose by 0.7% ($16 million) in the September Quarter 2004, following two quarterly decreases in March (0.8%) and June (1.1%). The state's capital expenditure in the September quarter amounted to $2,305 million, only $29 million below the record high of the December Quarter 2003 ($2,334 million). Driving growth in capital expenditure was a 4.5% increase in investment on Buildings and structures (up $43 million to $1,005 million). However, offsetting growth was a third successive quarterly decrease in investment on Equipment, plant and machinery
(down 2.3% or $31 million to $1,296 million).
In original current price terms, business investment in Western Australia was 3.2% ($71 million) higher in the September Quarter 2004, than in the same quarter of 2003. Investment growth during the period was largely driven by a 16.6% ($101 million) increase in expenditure in Other selected industries, comprising Retail trade, Construction and Property and business services. Investment in the state's Mining industry also increased during the period, although by a more modest 1.3% ($17 million).
According to the Western Australian Department of Treasury and Finance, business investment in Western Australia is expected to remain near current levels over the medium term, supported by favourable business conditions and a number of resource projects still to be completed.
Housing finance commitments
The number of housing finance commitments (trend) in Western Australia rose by 1.6% to 7,246 in October 2004. During the three months to October, the number of housing finance commitments increased at an average monthly rate of 1.9% (133) - up from 1.3% (88) in the previous three month period - possibly in response to stamp duty concessions introduced in July 2004.
Recent growth in the number of houses financed coincided with the seventh consecutive monthly increase in the value of housing finance commitments in Western Australia, dating back to April 2004. The value of housing finance commitments in the three months to October 2004 was 10.2% ($330.2 million) higher than in the previous three month period.
In original terms, there were 2.3% fewer housing finance commitments in Western Australia in the three months to October 2004, compared to the three months to October 2003. Over the period, the number of housing finance commitments rose 25.6% for first home buyers, but fell 7.3% for non-first home buyers.
Average borrowing sizes increased for both first home buyers (up 14.3% to $166,233) and non-first home buyers (up 10.5% to $164,900) in the three months to October 2004, compared to the same period of 2003. This was only the tenth time since the monthly series began in July 1991 that the average borrowing size for first home buyers was higher than that for non-first home buyers. The average borrowing size for first home buyers was greater than the average borrowing size for non-first home buyers in each of the three months to October 2004, with the difference increasing from $800 in August 2004 to $2,600 in October 2004.
The number of houses approved in Western Australia (trend) fell by 2.2% in the three months to October 2004, compared to the previous three month period. This was, however, less than half the size of the decline recorded nationally (5.1%). Despite the fall, house approvals in Western Australia remain near historically high levels, with approvals in October 2004 (1,535) only marginally below the peak in January 2004 (1,636). Following the introduction of stamp duty relief on 1 July 2004, the monthly rate of decline in house approvals has eased from 1.0% in July 2004 to 0.3% in October 2004.
Despite decreasing numbers, the total value of new houses approved in Western Australia (current prices) increased slightly in the three months to October 2004 - up by 0.4% ($3.2 million) from the previous three month period to reach $806.9 million. Nationally, the total value of new houses approved fell by 4.0%. Over the same period, the value of non-residential building approvals in Western Australia decreased by 20.7% ($95.2 million), mainly due to falls in the value of approvals of Health and Other business premises.
The value of Western Australia's trade surplus increased by $685.2 million (13.5%) to $5,756.1 million in the September Quarter 2004, compared to the same quarter of 2003. Over the period, growth in the value of the state's exports (up $1,215.5 million) was more than double the rise in the value of imports (up $530.3 million). Western Australia's export growth was the highest recorded since the December Quarter 2000, fuelled by strong international demand, which also served to keep commodity prices high in both $US and $A terms.
The September quarter also saw an increase in the state's capacity to meet demand for resource commodities, particularly iron ore, with a number of projects coming on-line, including Hamersley's Eastern Range mine, the completion of the first stage of expansion work at Yandicoogina, Robe River's West Angelas, Mt Gibson's Tallering Peak and BHP Billiton's Mining Area C. Imports continued to be supported by the strong $A and increased investment expenditure on imported capital goods during the September Quarter 2004.
Between the September Quarters of 2003 and 2004, Western Australia's trade position improved with several major trading partners. Most significantly, the state's trade surplus with Japan increased by $248.5 million to $1,704.9 million, largely due to an increase in the value of iron ore exports; and the trade position with New Zealand moved from a deficit of $4.4 million to a surplus of $213.9 million, largely due to a rise in the value of petroleum exports. Conversely, the state's trade position with the United States of America moved from a surplus of $268.1 million to a deficit of $121.7 million over the period, driven by a decrease in the value of petroleum exports and an increase in the value of imports of non-monetary gold.
The value of Western Australia's exports rose by 15.4% to $9,083.7 million in the September Quarter 2004, compared to the September Quarter 2003. Exports of Metalliferous ores and metal scrap increased by $473.5 million (32.4%) over the period, comprised almost entirely of iron ore exports. During 2003-04, the price of iron ore increased by 11.8%, reflecting rising world demand, particularly from Asia. Agricultural exports also continued to improve following the effects of the 2002 drought, with exports of Cereals and cereal preparations increasing by $243.1 million (73.0%), wheat being the main contributor.
Offsetting the state's export growth, during the period, was a decrease in the value of exports of Iron and steel - down $69.8 million (86.8%). The decline in iron and steel exports was mainly due to the closure of one of the state's Hot Briquetted Iron (HBI) plants following an accident in May 2004. The value of exports of Medicinal and pharmaceutical products also declined over the period, down $61.3 million (57.7%).
The value of imports to Western Australia, in the September Quarter 2004, was $3,327.7 million, 19.0% higher than in the same quarter of 2003. The rise was mainly driven by increases in the value of imports of General industrial machinery and equipment, n.e.s. and machine parts, n.e.s. (up $119.9 million or 90.7%); and Petroleum, petroleum products and related materials (up $119.0 million or 31.1%). The growth in value of petroleum imports was largely a consequence of rising oil prices, with the actual volume of petroleum imports to Western Australia declining marginally over the period (down 3.9%).
Mineral and petroleum exploration expenditure
Mineral exploration expenditure (trend) continues to grow strongly in Western Australia, rising by 8.7% ($11.3 million) to $141.7 million in the September Quarter 2004 - the highest level of expenditure since the September Quarter 1998 ($155.0 million). Quarterly growth in the state's mineral exploration expenditure has averaged 8.6% since the March Quarter 2004.
In original terms, Western Australia's mineral exploration expenditure totalled $147.9 million in the September Quarter 2004 - $39.4 million (36.3%) higher than in the September Quarter 2003. The main driver of growth over the period was a $15.8 million (122.5%) increase in expenditure on Nickel and cobalt exploration, supported by high nickel prices fuelled by strong demand from stainless steel producers in South Korea, China and Europe. Expenditure on Gold exploration also grew over the period, up $5.9 million (8.7%).
Petroleum exploration expenditure (original) totalled $182.1 million in the September Quarter 2004 - $4.2 million (2.4%) higher than in the corresponding period of 2003. Increased expenditure on petroleum exploration in the state continues to be driven by rising global demand for oil, particularly from China.
Minerals to record increases in production in the September Quarter 2004, compared to the September Quarter 2003, were Salt (up 16.6%); and Iron ore (up 13.2%), in response to growing demand from China and Japan. Decreases were recorded in the production of Zinc (down 74.0%), due to the cessation of output from the Lennard Shelf project in late 2003; Diamonds (down 45.1%); and Tin (down 44.9%).
Short term arrivals on holiday
International travel to Western Australia declined to 47,639 visitors (by air on holiday) in the three months to September 2004 - 5,919 (11.1%) fewer than in the three months to September 2003. The decline, however, comes off a peak in visitor arrivals in late 2003, caused by the 2003 Rugby World Cup and the recovery in international travel following a period of sustained global uncertainty. Contributing to the decline in the three months to September 2004 were falls in visitor arrivals from Malaysia (down 3,027 or 35.1%), Singapore (down 2,011 or 24.6%) and the United Kingdom and Ireland (down 739 or 7.9%). Partially offsetting these falls were increases in the number of visitors from Japan (up 1,433 or 19.0%) and New Zealand (up 1,117 or 52.0%).
Short term departures on holiday
A total of 76,407 Western Australian residents departed overseas by air on holiday in the three months to September 2004 - 21,514 (39.2%) more than in the three months to September 2003. Increases were recorded in resident departures to most destinations, with the largest being a rise in departures to Indonesia (up 9,676 or 60.9%). Departures to Indonesia have risen steadily since February 2003, averaging monthly growth of 11.3%, reflecting the declining impact of the Bali bombings in late 2002. Large increases in departures, during the three months to September 2004, were also recorded to Thailand (up 3,276 or 68.2%) and Malaysia (up 2,149 or 109.4%).
The Western Australian labour market continued to perform strongly over the three months to November 2004, with the trend estimate of employed persons increasing by 1.4% (13,456) - well above the national increase of 0.8%. The number of persons employed full-time increased by 1.0% (7,034) over the period, compared to a 0.6% increase nationally.
Recent employment growth saw the total number of employed persons in Western Australia reach one million for the first time in November 2004. However, according to the Western Australian Department of Treasury and Finance, labour market conditions in the state are tightening, with businesses experiencing some difficulty filling skilled vacancies.
The Personal and other services industry in Western Australia recorded the largest increase in employment in November 2004, compared to the corresponding period of 2003. During this period, the number of employed persons (original) in Personal and other services rose by 15,582 (44.3%), mainly due to large increases in employment in Other personal services and Public order and safety. Other industries to record strong growth over the period were Manufacturing (up 12,296 or 14.0%) and Accommodation, cafes and restaurants (up 7,935 or 21.2%). The largest decrease in the number of employed persons was recorded by
Property and business services (down 8,670 or 7.1%), mainly attributable to falls in employment in Marketing and business management services and Legal and accounting services.
The trend estimate of unemployed persons in Western Australia fell by 2.1% (1,006) in November 2004 - the fourteenth consecutive monthly decrease. Over the three months to November 2004, the number of unemployed persons decreased by 6.1% (3,103), driven by falls in both the number of unemployed females (down 6.9% or 1,672) and unemployed males (down 5.5% or 1,432). The state's unemployment rate declined over the period, from 4.9% in August 2004 to 4.5% in November 2004. Western Australia's unemployment rate in November 2004 was the second lowest of all states and territories (behind the Australian Capital Territory's rate of 4.2%), and was well below the national unemployment rate of 5.3%.
The number of West Australians who were unemployed for 52 weeks or more since their last employment fell by 40.5% (4,089) in November 2004, compared to the corresponding period of 2003. The continued decline in the state's long-term unemployed is attributable to the strong performance of the labour market throughout 2004.
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