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The Western Australian economy grew steadily in the December quarter 2003, with State Final Demand (in trend chain volume terms) increasing by 1.8%, slightly above national growth of 1.7%. Household consumption and business investment continued to drive activity, increasing by 2.0% and 4.0% respectively, supported by cheaper imports from a higher $A.
The state's housing sector was the main detractor from growth during the December quarter 2003, as investment in new and used dwellings decreased by 1.8%, and expenditure on alterations and additions fell 2.4%. The main reason for the contraction in housing investment was the delay in house construction, caused by materials shortages. Interest rate rises of 0.25% in each of November and December 2003, took the Reserve Bank of Australia's cash rate target from 4.75% to 5.25% over the period.
Exports from Western Australia decreased by 3.0% in the December quarter 2003, compared to the December quarter 2002, coinciding with the appreciation of the $A against the currencies of the state's major trading partners. This was reflected in an 18.6% increase in the Trade Weighted Index over the same period, and included an appreciation of 28.3% against the $US. Partially offsetting the impact of the higher $A on exports were increased $US commodity prices and strong international demand.
The outlook for Western Australia's exports remains positive given the current world economic climate, with the US economy recording its highest annual average growth (3.1%) in three years in 2003 and the Japanese economy continuing to show signs of improvement. The Chinese economy also showed solid growth in 2003 (9.1%), continuing its strong demand for the state's resource commodities.
Growth in Western Australia's economy has seen a strengthening of the state's labour market. Full-time and part-time employment increased in the three months to December 2003, up by 0.6% and 1.3% respectively. The unemployment rate declined to 5.9% in Western Australia, compared to 5.8% nationally.
State Final Demand
State Final Demand in Western Australia (trend chain volume terms) increased by 1.8% ($355 million) to $20,145 million in the December quarter 2003, the thirteenth consecutive quarter of expansion. National growth was slightly lower at 1.7%. Growth in Western Australia's State Final Demand eased over the last three quarters of 2003 - from 2.6% in June to 2.4% in September and 1.8% in December.
In seasonally adjusted chain volume terms, State Final Demand increased in the December quarter 2003 by 0.6% ($117 million) to $20,078 million. The main drivers of growth were:
Partially offsetting the increase in State Final Demand were falls in Non-dwelling construction - down by $147 million (11.4%), due to a reduction in construction activity on some of the state's major resource and energy projects; and Dwelling investment - down by $95 million (8.4%), as a result of delays caused by shortages of building materials (mainly bricks).
Consumer Price Index
Growth in Perth's Consumer Price Index (CPI) slowed to 0.4% in the December quarter 2003, following strong growth in the previous quarter (0.9%). Nationally, the CPI increased 0.5% in the December quarter 2003. Prices growth during the December quarter was mainly a result of strong domestic demand for locally produced products such as housing and food, and higher travel costs over the holiday period. These increases were offset by a decline in the price of crude oil and the continued impact of the strong $A on the price of imported goods.
Major contributors to the increase in Perth's CPI in the December quarter 2003 were:
Offsetting price decreases came mainly from:
In the twelve months to December 2003, Perth's CPI increased by 2.1% - the third consecutive quarter that the annual rate of growth has remained unchanged. Nationally, the CPI rose 2.4% in the year to December, remaining within the Reserve Bank of Australia's 2-3% target range for inflation.
Wage Cost Index
The quarterly index of total hourly rates of pay excluding bonuses for Western Australia increased by 0.7% in the December quarter 2003, following an increase of 1.3% in the September quarter 2003. Nationally, the wage cost index rose by 0.9% in the December quarter 2003, in original terms.
In the twelve months to December 2003, wages in Western Australia grew by 3.4%, compared to a national increase of 3.7%. Annual wages growth ranged from 3.2% in Victoria to 4.5% in the Australian Capital Territory.
Of the selected industries in Western Australia, Property and business services and Personal and other services recorded the highest quarterly wages growth in the December quarter 2003, both rising by 1.2%. The highest annual wages growth of 4.7% was recorded by the Property and business services industry. Education recorded the lowest quarterly increase for the December quarter at 0.2%, and the lowest annual increase of 2.3% was recorded by the Retail trade and Manufacturing industries.
Labourers and related workers, at 1.2%, had the highest quarterly wages growth of the selected occupations in the December quarter 2003. Professionals recorded the highest annual increase, with wages rising by 3.9% since the December quarter 2002. Elementary clerical, sales and service workers had the lowest quarterly increase of 0.3%, while the lowest annual increase of 2.6% was recorded by Associate professionals.
New Motor Vehicle Sales
New motor vehicle sales in Western Australia (trend) continued to fall in February 2004, down 0.1% to 7,125 vehicles - the sixth consecutive monthly decline since August 2003 (7,248). Since October 2003, however, the rate of decline has slowed, with sales of new motor vehicles remaining near historically high levels.
In the three months to February 2004, new motor vehicle sales (trend) totalled 21,392 - a decrease of 194 vehicles (0.9%), compared to the three months to November 2003. The decline was solely attributable to a fall in sales of passenger vehicles, down 378 (2.9%), which more than offset an increase in sales of other vehicles, up 184 (2.2%).
Despite recent falls, sales of new motor vehicles (trend) in the three months to February 2004 were 2,066 (10.7%) higher than in the three months to February 2003. The rise was due to sales of both other vehicles and passenger vehicles - up 1,304 (17.8%) and 762 (6.6%) respectively - influenced by a combination of low interest rates, the strong $A and a sustained period of employment growth.
Retail turnover in Western Australia (trend) totalled $4,522.0 million in the three months to January 2004, an increase of $58.9 million (1.3%) compared to the three months to October 2003. Monthly growth in retail turnover in Western Australia over the three months to January 2004 averaged 0.4%, compared to 0.6% nationally.
The main industry groups contributing to retail growth in the three months to January 2004, compared to the three months to October 2003, were:
In trend terms, Department stores retailing was the only industry group to record a decrease in retail turnover - down $6.5 million (1.7%).
In trend chain volume terms, Western Australia's retail turnover rose by 1.9% to $4,417.1 million in the December quarter 2003. Nationally, retail turnover increased by 2.4% over the same period.
FINANCE AND INVESTMENT
Private New Capital Expenditure
Business investment in Western Australia (trend chain volume terms) continued to grow in the December quarter 2003 (up 6.9% to $2,475 million), although at a slower rate than in the preceding September (11.0%) and June (12.3%) quarters. Growth was mainly driven by expenditure on Equipment, plant and machinery (up 10.1% or $151 million), with spending on Buildings and structures increasing only marginally (up 0.7% or $6 million). The December quarter increase in business investment in Western Australia occurred despite recent interest rate rises, and continued appreciation of the $A which has impacted on returns to projects, and was greater than the 2.5% increase in investment at the national level.
In original current price terms, business investment in Western Australia in the December quarter 2003 was $2,567 million - 36.8% ($691 million) higher than in the December quarter 2002. During this period, growth in business investment was led by activity in the state's Mining industry - up 43.0% ($423 million). Also contributing to the rise were Manufacturing, up 88.3% ($174 million); and Other selected industries (including Retail trade, Property and business services and Construction), up 13.5% ($94 million).
According to the Western Australian Department of Treasury and Finance, the outlook for business investment in Western Australia remains positive in the near term, with on-going work on existing projects within the mining sector expected to continue to underpin growth, partly reflecting China's strong demand for raw materials. The longer term outlook is less certain, with further growth dependent on the commitment to new projects of substantial value and movements in the $A.
Housing Finance Commitments
The number of housing finance commitments (trend) in Western Australia fell for the third consecutive month in January 2004, decreasing by 109 to a total of 7,265 commitments, possibly as a result of recent interest rate rises. Over the three months to January 2004, the number of housing finance commitments in Western Australia decreased by an average of 1.1% per month, compared to an average monthly fall of 2.0% nationally. Despite this decline, Western Australia's housing finance commitments remained near historically high levels after eleven consecutive months of growth between December 2002 and October 2003.
The total value of housing finance commitments in Western Australia fell for the fourth consecutive month in January 2004, down $25.3 million (2.3%) to $1,062.9 million.
In original terms, there were 3,110 (17.4%) more housing finance commitments made in the three months to January 2004 than in the three months to January 2003. Dwellings financed by non-first home buyers contributed almost entirely to the rise, increasing by 3,061 dwellings (20.6%), while dwellings financed by first home buyers increased by 49 dwellings (1.6%).
The gap between the average borrowing sizes of first home buyers and non-first home buyers contracted further in the three months to January 2004, falling to just $600 - down from $15,700 in the three months to January 2003. Over this period, the average borrowing size for first home buyers increased 14.2% to $146,400, while the average borrowing size for non-first home buyers rose 2.1% to $147,000.
There were 4,706 new houses approved in Western Australia in the three months to January 2004 - 543 houses (10.3%) fewer than in the three months to October 2003. Nationally, the number of new approvals fell by 13.9% over the same period. The decline in new house approvals suggests that interest rate rises in late 2003 may be starting to affect dwelling investment. Despite this, the number of new house approvals has remained at a moderately high level.
In current price terms, the total value of new houses approved in Western Australia fell by $57.8 million (7.5%) to $714.6 million in the three months to January 2004, compared to the three months to October 2003. The decline at the national level was 10.8%. Over the same period, the value of new other residential building approvals in Western Australia fell by $27.7 million (21.7%). In contrast, the value of non-residential building approvals rose by $39.9 million (12.8%) to $351.3 million, mainly due to increased construction activity on roads and mines.
Western Australia's trade surplus totalled $5,024 million in the December quarter 2003 - $109 million (2.1%) less than in the December quarter 2002. During this twelve month period, the value of merchandise exports fell $243 million (3.0%) to $7,978 million, due to the impact of the strong $A on export values, as local producers may have reduced the $A price of their exports to maintain volumes sold. Support for exports over the period came from rising $US commodity prices and strong international demand. The value of Western Australia's merchandise imports also fell in the December quarter 2003, compared to the December quarter 2002 - down $134 million (4.3%) to $2,954 million.
The major commodities contributing to the decrease in the value of Western Australia's merchandise exports in the December quarter 2003, compared to the December quarter 2002, were:
Partially offsetting the decline were increases in the value of exports of:
The value of exports from Western Australia to India was $456 million (213.3%) higher in the December quarter 2003 than in the December quarter 2002, due to an increased demand for gold. The value of exports was also higher to the United Kingdom, up $213 million (57.9%); and Indonesia, up $121 million (77.8%). These increases, however, were not enough to overcome large decreases in export trade with Japan, down $413 million (19.5%); the Republic of Korea, down $249 million (24.2%); and the United States of America, down $194 million (38.8%).
The major commodities contributing to the decrease in the value of imports to Western Australia in the December quarter 2003, compared to the December quarter 2002, were:
Increased imports into Western Australia were recorded for:
The value of imports into Western Australia from Indonesia was $134 million (40.1%) lower in the December quarter 2003 than in the December quarter 2002. The value of imports was also lower from the Republic of Korea, down $127 million (44.4%); and Switzerland, down $38 million (81.0%). Conversely, the value of imports was higher from the United States of America, up $63 million (20.6%); and Thailand, up $51 million (57.4%).
Mineral and Petroleum Exploration
Growth in mineral exploration expenditure (trend) in Western Australia continued in the December quarter 2003, rising by $2.3 million to $110.8 million - the seventh successive quarterly increase since the June quarter 2002. Over the last three quarters of 2003, the rate of growth increased from 0.5% in June to 1.9% in September and 2.1% in December.
In original terms, Western Australia's mineral exploration expenditure for the December quarter 2003 was $122.0 million - $10.9 million (9.8%) higher than in the December quarter 2002. Minerals contributing most to the increase were:
Gold exploration expenditure fell by $3.4 million (4.9%) to $66.4 million over the period. According to the Western Australian Department of Industry and Resources, this reflects downward pressure on the price of gold as investors, encouraged by the prospect of world economic growth in 2004, divert funds from gold towards equities. The Western Australian Department of Treasury and Finance also expects further downward pressure on gold prices from a stronger $US decreasing the $US denominated gold price.
In the December quarter 2003, petroleum exploration expenditure (original) totalled $188.2 million - $18.0 million (10.6%) higher than in the December quarter 2002. The rise in expenditure on petroleum exploration over the period coincided with strong $US oil prices arising from production constraints by OPEC; the delay in the return of oil production to pre-war levels; and increased global demand for oil as world economic growth accelerates.
Production increased in the December quarter 2003, compared to the December quarter 2002, for:
Decreases were recorded in the production of:
Short Term Arrivals on Holiday
A total of 78,046 overseas visitors arrived by air on holiday to Western Australia in the three months to December 2003 - only 160 (0.2%) fewer than in the three months to December 2002. During this period, there were large increases in arrivals from Malaysia (up 2,135 or 28.2%) and South Africa (up 1,305 or 104.2%). However, these increases were more than offset by a decline in visitor arrivals from several countries including Singapore (down 2,009 or 13.2%), the United Kingdom and Ireland (down 538 or 2.5%) and Japan (down 460 or 5.6%).
Short Term Departures on Holiday
A total of 52,673 Western Australian residents departed overseas by air on holiday in the three months to December 2003 - the highest level recorded in this period for three years and 11,224 (27.1%) more than in the three months to December 2002. Accounting for most of this increase were resident departures to Indonesia (up 9,752 or 142.3%), reflecting growing confidence in travel following the Bali bombings in late 2002. However, resident departures to some destinations did decrease during the period, including Thailand (down 1,125 or 18.2%) and Singapore (down 864 or 18.1%).
The number of employed persons in Western Australia (trend) increased for the sixth consecutive month in February 2004, up by 1,600 (0.2%) to 973,600. Over the three months to February 2004, the number of employed persons grew by 6,700, driven solely by increases in part-time employment for both males and females (up 5,700 and 3,000 respectively). The number of persons employed full-time decreased by 2,000 - equal for both males and females.
Over the three months to February 2004, the number of employed persons in Western Australia increased at an average monthly rate of 0.2%, equal to the national monthly increase over the same period.
Wholesale trade showed the largest increase in the number of employed persons (original) in the three months to February 2004, compared to the three months to February 2003 - up 8,300 (19.9%) to 50,000. This largely reflected increased wholesaling of farm products following recovery from the 2002-03 drought. Other notable increases were in Health and community services - up 7,800 (8.8%) to 96,300; and Property and business services - up 6,500 (6.1%) to 113,300.
Manufacturing recorded the largest decrease in the number of employed persons - down 13,500 (13.2%) to 88,500. This coincided with a decline in the export of manufactured goods, mainly non-ferrous metals. Other industries showing notable decreases in the number of employed persons were Retail trade - down 8,700 (5.4%) to 151,200; and Government administration and defence - down 4,400 (11.9%) to 32,700.Unemployment
The number of unemployed persons in Western Australia (trend) declined for the fifth consecutive month in February 2004, down by 800 (1.3%) to 59,300. In the three months to February 2004, the number of unemployed persons fell by 2,800. The decrease was the result of a fall in the number of unemployed males (down 3,000), which more than offset a rise in the number of unemployed females (up 200). During this period, the number of unemployed Western Australians decreased at an average monthly rate of 1.5%, well above the average monthly decrease of 0.1% nationally.
The unemployment rate (trend) in Western Australia declined to 5.7% in February 2004 - the lowest level recorded in the last ten years. Nationally, the unemployment rate remained constant at 5.8% over the three months to February 2004.
In February 2004, there were 9,500 long-term unemployed persons in Western Australia (those who have been unemployed for 52 weeks or more since their last employment). This level decreased by 2,300 persons compared to February 2003.
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