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In seasonally adjusted chain volume terms, State Final Demand rose marginally by 0.3% ($51 million) in the March quarter 2004 to $20,278 million. The main drivers of growth were:
The main detractors to growth in State Final Demand were Machinery and equipment investment - down $118 million (5.0%); and investment in intangible fixed assets - down by $89 million (20.8%), as a result of the completion of a major petroleum exploration project in the previous quarter.
Consumer Price Index
Growth in Perth's Consumer Price Index (CPI) eased for the second successive quarter to 0.3% in March 2004 - the lowest CPI increase of all capital cities, largely due to the comparatively low price increases in Perth for food, alcohol and tobacco and clothing and footwear. Nationally, prices increased by 0.9% during the same period.
Major contributors to the increase in Perth's CPI in the March quarter 2004 were:
The continued strength of the $A, however, contributed to a number of offsetting price decreases in the March quarter 2004, including:
In the twelve months to March 2004, Perth's CPI increased by 1.6%. The national CPI rose by 2.0% over the same period, remaining within the Reserve Bank of Australia's (RBA's) target range for inflation. Despite national CPI growth being at the lower end of the RBA's target range, the Western Australian Department of Treasury and Finance have indicated that credit growth, the rapid increase in house prices and the improved international outlook are threatening the inflationary outlook for the longer term.
Wage cost index
Wages growth in Western Australia continued to ease in the March quarter 2004, with the state's quarterly index of total hourly rates of pay excluding bonuses increasing by 0.6%, following growth of 0.7% and 1.3% in the previous two quarters. Nationally, the wage cost index rose by 0.8% over the same period.
In the twelve months to March 2004, Western Australia recorded the lowest wages growth among the states and territories with 3.1%, compared to national growth of 3.6%. The Australian Capital Territory recorded the highest annual wages growth of 4.2%.
Of the selected industries in Western Australia in the March quarter 2004, Manufacturing recorded the highest quarterly wages growth of 1.8%, double the next largest quarterly increase recorded by Government administration and defence. Along with Accommodation, cafes and restaurants, Manufacturing also recorded the highest annual wages growth of 3.5% - coinciding with strong investment activity in the industry over 2003. Despite high wages growth over the last year, Accommodation, cafes and restaurants recorded the equal lowest quarterly increase of 0.1% (with Mining), coming off the surge in economic activity associated with the Rugby World Cup during the December quarter 2003. The lowest annual growth in wages was recorded by Retail trade (2.3%).
Tradespersons and related workers and Elementary and Intermediate clerical, sales and service workers all recorded wages growth of 0.7% in the March quarter 2004. The lowest quarterly wages growth of 0.2% was recorded by Labourers and related workers. Wages growth for Tradespersons and related workers was strong throughout the year (up 3.4%), reflecting an under-supply of tradespersons during a period of heightened construction activity. However, Intermediate clerical, sales and service workers, and Professionals, recorded the highest annual wages growth of 3.5%. The lowest annual wages growth of 2.0% was recorded by Managers and administrators.
New motor vehicle sales
Sales of new motor vehicles in Western Australia (trend) have increased steadily throughout 2004, following a brief period of decline in late 2003. In May 2004, 7,350 new motor vehicles were sold in Western Australia, representing growth of 0.8% over the previous month and a fifth consecutive monthly increase.
Between December 2003 and May 2004, new motor vehicle sales increased by an average of 0.6% (42 vehicles) per month. The new motor vehicle market in Western Australia has been aided by the continued strength of the $A, which has worked to push down the price of imported vehicles, and by recent high levels of consumer confidence fuelled by strong gains in household wealth.
While there has been some growth in passenger vehicle sales in recent months, most of the increase in new motor vehicle sales has been driven by sales of other vehicles such as utilities, vans, trucks, buses and four-wheel drives. In the three months to May 2004, a total of 21,875 new motor vehicles were sold in Western Australia - 418 more than in the preceding three months. Almost 95% of this growth was attributable to increased sales of other vehicles (up by 397 vehicles).
Despite recent growth, consumption of new motor vehicles in Western Australia is expected to slow in 2004-05, affected by higher consumer debt servicing requirements following the interest rate rises of late 2003, and recent signs of some weakening of the $A.
In the three months to April 2004, retail turnover in Western Australia (trend) totalled $4,591.6 million - $76.1 million (1.7%) more than in the three months to January 2004. Monthly growth in retail turnover in Western Australia averaged 0.6% over the three months to April 2004, double the national rate of 0.3%.
The main industry groups contributing to retail growth in the three months to April 2004, compared to the three months to January 2004, were:
Much of the recent upturn in Western Australia's retail turnover has coincided with the continued strengthening of the state's labour market. Recent months have seen rising incomes, record low unemployment and strong employment growth, as well as gains in household wealth from a buoyant property market, and high levels of consumer sentiment. However, the Western Australian Department of Treasury and Finance suggests that consumers are increasingly relying on debt and equity withdrawals to finance their consumption, which may impact negatively on future spending if interest rates rise.
In trend chain volume terms, Western Australia's retail turnover rose by 1.5% to $4,490.0 million in the March quarter 2004, slightly less than retail turnover at the national level (1.6%).
FINANCE AND INVESTMENT
Private new capital expenditure
After a lengthy period of uninterrupted growth - peaking at 12.5% in the June quarter 2003 - business investment in Western Australia has begun to ease, with a number of large resource projects nearing completion and the strong $A impacting on project returns. In the March quarter 2004, business investment in the state (trend chain volume terms) increased by just 0.4% to $2,392 million, following growth of 8.7% and 4.2% in the two preceding quarters. The small increase in investment over the March quarter was driven by growth in expenditure on Equipment, plant and machinery (up 1.1% or $17 million), however, this was largely offset by decreased spending on Buildings and structures (down 1.4% or $12 million). Nationally, business investment increased by 0.3% over the same period.
In original current price terms, business investment in Western Australia in the March quarter 2004 was $1,878 million - 9.8% ($167 million) more than in the March quarter 2003. During this period, growth in business investment was led by activity in Other selected industries (including Retail trade, Property and business services and Construction), up 28.5% ($136 million), supported by several large retail construction projects. Investment in the state's Mining industry also increased over the period (up 6.9% or $68 million). Offsetting these increases was a decline in expenditure by the Manufacturing industry (down 14.6% or $36 million), following solid gains throughout 2003, due to investment in downstream mineral processing.
According to the Western Australian Department of Treasury and Finance, the outlook for business investment in Western Australia for the coming year is for a consolidation of activity at existing levels, with growth expected to be driven by the Mining and Manufacturing industries.
Housing finance commitments
Since peaking in September 2003, the number of housing finance commitments (trend) in Western Australia has steadily declined, falling 10.0% (749 commitments) by April 2004. There is, however, some indication that the decline in housing finance commitments is beginning to ease. The average monthly rate of decline in housing finance dropped to 1.5% in the three months to April 2004, from an average of 2.0% in the preceding three month period. The state's average monthly rate of decline in housing finance commitments (1.5%) over the three months to April 2004, was well below the national average decline of 2.7%.
The total value of housing finance commitments in Western Australia fell by 3.8% ($122.7 million) to $3,103.0 million in the three months to April 2004, compared to the three months to January 2004. However, there was a small increase (0.1% or $0.8 million) in the total value of housing finance commitments in April 2004, following six consecutive months of decline.
In original terms, there were 1,284 (6.7%) more housing finance commitments in Western Australia in the three months to April 2004, than in the three months to April 2003. The rise was driven solely by a 9.2% increase in dwellings financed by non-first home buyers. Over the same period, dwellings financed by first home buyers declined by 6.5% (197 dwellings). First home buyers may have dropped out of the housing market during this period as a consequence of interest rate rises in late 2003, and the continued escalation of Western Australian house prices. Established house prices in Western Australia were 19.0%, and project house prices 10.1%, higher in the March quarter 2004 than they were a year earlier.
Coinciding with growth in house prices was a 10.1% increase in the average borrowing size of first home buyers - from $137,000 in the three months to April 2003 to $150,900 in the same period a year later. The average borrowing size for non-first home buyers increased by 6.6% to $156,000. During this period, the gap between the average borrowing size of first home buyers and non-first home buyers decreased from $9,400 to $5,100.
While there has been some volatility in the original series, there appears to have been a general downward trend in new house approvals in Western Australia, since peaking in October 2003. A total of 4,514 new houses were approved in Western Australia in the three months to April 2004 - 190 less approvals than in the previous three months. This was in contrast to a national increase in new house approvals of 3.8% over the same period.
Despite the recent decline in Western Australia's new house approvals, the Western Australian Housing Industry Forecasting Group expects new house construction to be sustained in the short-term by a backlog of work.
In current price terms, the total value of new houses approved in Western Australia fell by 1.6% ($11.2 million) to $702.6 million in the three months to April 2004, compared to the three months to January 2004. Nationally, the total value of new houses approved increased by 8.2%. Over the same period, the value of non-residential building approvals in Western Australia fell by 24.1% ($89.5 million) to $281.4 million, reflecting the completion of a number of major retail and office construction projects.
Western Australia recorded a trade surplus of $4,976 million in the March quarter 2004, $12 million (0.2%) higher than in the March quarter 2003. The slight increase in the trade surplus was the result of Western Australia's imports falling by more than its exports. The value of Western Australia's merchandise imports fell by $300 million (9.2%) to $2,973 million during this period, while the value of its merchandise exports fell by $288 million (3.5%) to $7,949 million. Despite the decrease in export values from a higher $A, the volume of merchandise exports from Western Australia remained strong, aided by strong international demand.
The major commodities contributing to the decrease in the value of Western Australia's merchandise exports in the March quarter 2004, compared to the March quarter 2003, were:
Partially offsetting the decline were increases in the value of exports of:
Exports of gold and petroleum were almost entirely responsible for movements in the total value of exports from Western Australia to selected countries in the March quarter 2004, compared to the March quarter 2003. The value of gold exports was the driving force behind an increase in exports from Western Australia to India (up $848 million or 2,390.5%), and decreases in exports to the United Kingdom (down $829 million or 73.7%), Japan (down $346 million or 17.5%) and Singapore (down $240 million or 51.0%). The value of petroleum exports was the main contributor to increases in exports to the Republic of Korea (up $121 million or 14.5%) and Thailand (up $98 million or 99.5%).
A large fall in the value of gold imports was the main contributor to the decrease in the total value of imports to Western Australia in the March quarter 2004, compared to the March quarter 2003. Non-monetary gold fell by $392 million (42.4%), coming off a record high level of imports in the March quarter 2003, associated with the transfer of interstate gold refining operations to Western Australia.
The appreciation of the $A contributed to increased imports into Western Australia for:
Imports of gold and petroleum were the main drivers of the decrease in the total value of imports to Western Australia from Indonesia (down $257 million or 41.9%) and the United Arab Emirates (down $109 million or 77.2%) in the March quarter 2004, compared to the March quarter 2003. These two commodities were also responsible for the increase in imports from Malaysia (up $123 million or 258.6%) during the same period. The value of imports from Germany increased over the period (up $42 million or 36.1%), mainly due to an increase in imports of specialised machinery.
Mineral and petroleum exploration
Mineral exploration expenditure (trend) in Western Australia rose by $2.7 million to $113.8 million in the March quarter 2004 - the eighth successive quarterly increase. Quarterly growth in mineral exploration expenditure has averaged 2.5% since the June quarter 2002.
In original terms, Western Australia's mineral exploration expenditure for the March quarter 2004 was $96.5 million - $5.7 million (6.3%) higher than in the March quarter 2003. Minerals contributing most to the increase were:
Silver, lead and zinc exploration expenditure fell by $1.5 million (68.2%) to $0.7 million over the period, coinciding with the closure of a major zinc mine in the December quarter 2003.
Petroleum exploration expenditure (original) totalled $106.9 million in the March quarter 2004 - $84.6 million (44.2%) less than in the March quarter 2003. The sharp fall in expenditure on petroleum exploration over the period was the result of the completion of a major petroleum exploration project in the December quarter 2003.
Minerals to record increases in production in the March quarter 2004, compared to the March quarter 2003, were:
Decreases were recorded in the production of:
Short term arrivals on holiday
A total of 54,543 overseas visitors arrived by air on holiday to Western Australia in the three months to March 2004 - 1,090 (2.0%) more than in the three months to March 2003. The recovery in short term visitor arrivals suggests an easing in the negative impact on international travel of recent world events, such as SARS, the war in Iraq and terrorism. In the three months to March 2004, there were increases in arrivals from the United Kingdom and Ireland, up 1,463 (8.7%); Malaysia, up 897 (22.2%); and Japan, up 672 (9.7%). Partially offsetting these increases was a large fall in the number of visitors from Singapore, down 1,831 (23.6%).
Short term departures on holiday
A total of 50,854 Western Australian residents departed overseas by air on holiday in the three months to March 2004 - the highest level recorded in this period for the last ten years, and 17,275 (51.4%) more than in the three months to March 2003. Driving the rise were the combined effects of the strong $A, growing confidence in international travel, pent-up demand and competitive travel discounting. Accounting for most of the increase were resident departures to Indonesia, up 12,453 (160.7%). Resident departures to New Zealand also increased over the three months to March 2004 - up 1,606 (34.8%). Decreases in resident departures were, however, recorded for some countries including Singapore, down 951 (19.8%); and Hong Kong, down 762 (69.4%).
The state's labour market continues to strengthen, with the number of employed persons in Western Australia (trend) increasing for the ninth consecutive month to 992,000 in May 2004 - up 3.2% or 30,700 from August 2003.
Over the three months to May 2004, the number of employed persons grew by 1.4% (13,700), driven by growth in both full-time and part-time employment. Full-time employment increased by 1.0% (6,700) to 693,600, while part-time employment rose by 2.4% (7,100) to 298,500 during the period. The number of employed persons in Western Australia grew at an average monthly rate of 0.5% over the three months to May 2004, more than twice the national increase of 0.2%.
The Western Australian Department of Treasury and Finance expects labour market conditions in Western Australia to remain strong in 2004-05, assisted by the strong state economy. However, further employment growth is expected to be constrained by limits on the available supply of skilled labour.
In percentage terms, the Mining industry recorded the largest increase in the number of employed persons (original) in the three months to May 2004, compared to the three months to May 2003 - up 30.1% (10,800) to 46,700, coinciding with ongoing investment activity and the completion of several resource projects. Other notable increases were Cultural and recreational services - up 16.7% (3,200) to 22,400; and Finance and insurance - up 14.7% (3,700) to 28,800.
Communication services recorded the largest percentage decrease in the number of persons employed - down 30.9% (5,500) to 12,300. Other industries showing notable decreases were Accommodation, cafes and restaurants - down 6.3% (2,700) to 40,500; and Property and business services - down 6.2% (7,200) to 109,400.
Since September 2003, the number of unemployed persons in Western Australia (trend) has declined rapidly to 53,100 in May 2004. Eight consecutive monthly decreases over this period have resulted in a 15.7% (9,900) fall in the number of unemployed persons in Western Australia.
In the three months to May 2004, the number of unemployed persons fell by 7.8% (4,500), with the number of unemployed females down 10.8% (3,000) and unemployed males down 5.0% (1,500). During this period, the number of unemployed Western Australians declined at an average monthly rate of 2.7%, almost four times the rate of national decline (0.7%).
The sustained growth in employment in Western Australia since September 2003 has resulted in a sharp fall in the state's unemployment rate. The unemployment rate of 5.1% (trend) in May 2004 was the lowest rate recorded for Western Australia since the monthly series began in February 1978. Nationally, the unemployment rate for May was 5.6%, unchanged from the previous month.
The continued strengthening of the Western Australian labour market also coincided with a reduction in the state's long-term unemployed (those who have been unemployed for 52 weeks or more since their last employment). In May 2004, the number of long-term unemployed in Western Australia dropped by 15.4% (1,600 persons) to 8,800 persons, compared to May 2003.
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