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In seasonally adjusted chain volume terms, state final demand in Western Australia increased by 0.8% ($175 million) in the December Quarter 2004. Business investment on Machinery and equipment made the largest contribution to growth during the quarter, increasing by $149 million (7.1%), mainly driven by the mining, manufacturing and agriculture industries. Final consumption expenditure by State and local government contributed a further $71 million (3.2%) to state final demand, while Household final consumption expenditure was strong for Recreation and culture (up $44 million or 3.1%) and Rent and other dwelling services (up $21 million or 1.1%).
The main detractor from growth in state final demand in the December Quarter 2004 was State and local government investment, decreasing by $115 million (24.6%), mainly on road construction, housing and community amenities. Other notable declines were in private investment on Intangible fixed assets (down $43 million or 10.1%) and household expenditure on Hotels, cafes and restaurants (down $29 million or 4.1%), Food (down $25 million or 1.9%) and Purchase of vehicles (down $22 million or 5.2%).
Consumer Price Index
Perth's Consumer Price Index (CPI) rose by 0.9% in the December Quarter 2004, following a 0.7% increase in the previous quarter. Prices growth in Perth during the December quarter was slightly above the national weighted average of 0.8%.
The main contributor to Perth's CPI growth in the December Quarter 2004 was Housing (up 1.9%), largely attributable to increases in the purchase price of housing, as a result of rising costs for skilled labour and materials such as steel. Other notable contributions were: Transportation (up 1.6%), driven by rising petrol prices; and Recreation (up 1.2%), reflecting a seasonal increase in holiday accommodation tariffs and domestic airfares.
The only detractors from prices growth in Perth in the December Quarter 2004 were Clothing and footwear (down 1.7%), reflecting discounting by retailers in the lead-up to Christmas; and Health (down 0.5%), due to the cyclical effect of the Pharmaceutical Benefits Scheme safety net in lowering pharmaceutical prices towards the end of the year.
Perth's CPI rose by 2.9% in the December Quarter 2004, compared to the December Quarter 2003. Nationally, the CPI rose by 2.6% over the same period - within the Reserve Bank of Australia's (RBA) target range of 2.0%-3.0%. The RBA, however, expects inflation to increase gradually in 2005, as a result of rising production costs from higher raw materials prices, strong domestic and international demand, and the continued strength of the labour market, placing upward pressure on wage costs.
Wage Price Index
Wages growth in Western Australia moderated slightly in the December Quarter 2004, with the state's quarterly index of total hourly rates of pay excluding bonuses increasing by 1.4%, following an increase of 1.7% in the previous quarter. Growth in the state's wages in the December Quarter 2004 was higher than the national growth of 1.0%, and was the second largest increase of all the states and territories behind the Australian Capital Territory (up 1.8%). These increases partly reflect a further flow-on effect from the May 2004 Safety Net Review decision to raise full-time minimum award wages by $19 per week.
Of the selected industries for Western Australia, wages growth in the December Quarter 2004 was highest in Government administration and defence (up 2.1%) and Property and business services (up 1.2%). The highest quarterly growth among the selected occupations was recorded by Labourers and related workers (up 4.7%) and Tradespersons and related workers (up 3.5%). Anecdotal evidence suggests that wages growth in these occupations may be driven by recent strong activity in the state's mining and construction sectors, coupled with a shortage of skilled workers.
Western Australia recorded wages growth of 4.1% in the December Quarter 2004, compared to the same quarter of 2003 - well above the national increase of 3.6% over the same period. The selected industries to record the highest annual wages growth were Manufacturing (up 5.2%) and Government administration and defence (up 4.3%). Labourers and related workers (up 7.6%) and Tradespersons and related workers (up 6.0%) recorded the highest annual wages growth among the selected occupations.
The RBA has noted that, although the strength of activity in the construction and resources sectors has lead to wage increases in those industries, there is little indication of emerging widespread wage pressure. They caution, however, that indicators of labour demand point to solid employment growth in the short term, and the recent tightening of labour market conditions could increase the likelihood of wage pressures building in the economy in the longer term.
New motor vehicle sales
Sales of new motor vehicles (trend) in Western Australia increased for the fourteenth consecutive month in February 2005, rising by 0.4% to 8,007 vehicles. While the number of new motor vehicles sold in the state remains at historically high levels, the rate of growth has slowed from a high of 2.7% in July 2004. Strength in new motor vehicle sales continues to be supported by high levels of consumer confidence and a strong $A, lowering the prices of imported vehicles. Over the three months to February 2005, growth in new motor vehicle sales in Western Australia averaged 0.3%, well below the average monthly growth of 0.9% recorded nationally.
Recent growth in Western Australia's new motor vehicle sales (trend) has been driven by sales of Passenger vehicles, which increased by 1.1% (153 vehicles) over the three months to February 2005, compared to the previous three month period. Sales of Sports utility vehicles increased by 0.9% (39 vehicles), while sales of Other vehicles declined by 0.2% (12 vehicles).
Retail turnover (trend) in Western Australia fell 0.2% in the three months to January 2005, compared to the previous three months, slightly below the 0.6% decline recorded nationally. The recent decline continues a period of easing in retail spending in Western Australia dating back to October 2004, following a sustained period of strong growth.
The main drivers of the decline in retail turnover, over the three months to January 2005, were spending on: Food, down $34.9 million (1.6%); Hospitality and services, down $13.6 million (2.3%); and Department stores, down $3.9 million (1.0%). Going against this trend, however, were strong increases in spending on: Recreational goods, up $19.3 million (7.7%); and Other retailing, up $11.3 million (2.3%).
INVESTMENT AND FINANCE
Private new capital expenditure
In trend chain volume terms, business investment in Western Australia rose by 2.9% ($69 million) to $2,417 million in the December Quarter 2004 - the highest level since the series began in the September Quarter 1989. Growth in the state's capital expenditure over the period was mainly driven by a 3.8% increase in expenditure on Buildings and structures (up $39 million to $1,063 million). This was the eleventh consecutive quarterly increase in investment in Buildings and structures, although the rate of growth has slowed from the high of 21.3% in the December Quarter 2002. Investment on Equipment, plant and machinery rose by 1.5% (up $20 million to $1,344 million) in the December Quarter 2004, following three successive quarterly declines. Recent growth in business investment in the state has been underpinned by strong activity in the resources sector, largely reflecting high demand for mineral resources from China.
In original current price terms, business investment in Western Australia was 5.0% ($127 million) higher in the December Quarter 2004 than in the same quarter of 2003. Investment growth over the period was largely driven by a 9.7% ($34 million) increase in investment in Manufacturing, and a 6.8% ($53 million) increase in investment in Other selected industries (comprising Retail trade, Construction and Property and business services). Investment in Mining also increased - up 2.8% ($40 million).
According to the Western Australian Department of Treasury and Finance, the overall outlook for business investment in Western Australia remains positive, supported by high profitability and strong domestic and international demand. However, the RBA suggests that capacity constraints may become more important for trade-exposed industries, which are yet to take full advantage of ongoing global economic expansion and favourable terms of trade.
Housing finance commitments
The number of housing finance commitments (trend) in Western Australia fell by 0.2% to 7,314 in January 2005, following eight consecutive months of growth. Average monthly growth in housing finance commitments fell to 0.2% over the three months to January 2005, down from an average of 2.0% in the previous three month period.
Despite declining numbers, the total value of housing finance commitments in Western Australia increased by 4.2% ($151 million) in the three months to January 2005. However, growth in the value of housing finance commitments over this period was well below the 9.9% ($323 million) increase recorded in the previous three month period. Monthly increases in the value of commitments have steadily moderated over the last seven months, from 3.6% in July 2004 to 0.0% in January 2005.
In original terms, the number of housing finance commitments in Western Australia, in the three months to January 2005, was 3.5% higher than in the corresponding period a year earlier. The number of commitments rose by 28.1% (869) for first home buyers over the period, but fell by 0.8% (148) for non-first home buyers. Average loan sizes increased for both first home buyers (up 0.9% to $168,736) and non-first home buyers (up 1.3% to $168,506) over the three months to January 2005.
The number of houses approved (trend) in Western Australia increased by 2.6% to 1,700 in January 2005 - the highest level of approvals since September 1999 (1,705). Over the three months to January, the number of houses approved in Western Australia increased by 7.7%, compared to the previous three months. In contrast, national house building approvals fell by 2.1% over the period.
In current price terms, the value of new houses approved in Western Australia, in the three months to January 2005, was $806.2 million - an increase of 0.1% from the previous three month period. Nationally, the value of new houses approved decreased by 10.2%. Over the same period, the value of non-residential building work approved in the state increased by 14.6% to $432.4 million, due to increases in the value of approvals of Health, Offices and Entertainment and recreational premises.
The value of Western Australia's trade surplus increased by $871.9 million (17.1%) between the December quarters of 2003 and 2004, rising to $5,968.3 million - the largest surplus recorded since the December Quarter 2000 ($6,000.5 million). Over the period, the value of the state's exports (up $1,408.0 million) increased by more than two and a half times the growth in the value of imports (up $536.1 million). The recent completion of a number of resource projects in Western Australia has bolstered the state's minerals and energy exports, with new production and transport capacity coming on-line to meet strong global demand. Growth in imports continues to be supported by high levels of consumer confidence and business investment, as well as a strong $A.
Between the December quarters of 2003 and 2004, Western Australia's trade position improved with several major trading partners. Most notably, the state's trade position with Thailand moved from a deficit of $4.0 million to a surplus of $443.5 million, largely due to increases in the value of exports of non-monetary gold and petroleum. The state's trade position with the USA also improved considerably over the period, moving from a deficit of $65.4 million to a surplus of $168.3 million, largely due to an increase in the value of petroleum exports. Conversely, the state's trade surplus with the United Kingdom fell by $199.3 million to $303.3 million, mainly attributable to a decrease in exports of combined confidential items (including alumina, nickel, mineral sands and some agricultural products).
The value of Western Australia's exports rose by 17.5% to $9,464.4 million in the December Quarter 2004, compared to the same quarter of 2003 - the highest value recorded since the quarterly series began in March 1988. Over the period, the value of exports of Petroleum, petroleum products and related materials increased by $460.5 million (49.9%), mainly driven by strong $US price growth. The value of exports of Natural and manufactured gas rose by $380.9 million (62.0%), comprised almost entirely of natural gas exports, coinciding with the commissioning of the 4th LNG train in the North West Shelf in December. Exports of Metalliferous ores and metal scrap increased by $380.2 million (24.0%), as a result of an increase in the volume of iron ore exports (up 14.9%), associated with recent production and transport (port) capacity expansions.
Offsetting the state's export growth over the period was a decrease in the value of exports of Iron and steel - down $77.6 million (76.7%). Since the closure of one of the state's Hot Briquetted Iron plants following an accident in May 2004, Western Australia has ceased to export pig iron products.
The value of imports to Western Australia rose by 18.1% to $3,496.1 million in the December Quarter 2004, compared to the same quarter of 2003. Much of the recent growth in imports has been fuelled by rising levels of investment activity, primarily within the state's resources sector. High levels of consumer and business sentiment have also added to imports growth, particularly for manufactured goods. The main commodities contributing to the rise in value of the state's imports in the December Quarter 2004 were: Petroleum, petroleum products and related materials, up $236.5 million (60.6%); General industrial machinery and equipment, n.e.s. and machine parts, n.e.s., up $106.7 million (65.1%); and Medicinal and pharmaceutical products, up $62.3 million (112.1%).
Mineral and petroleum exploration expenditure
Mineral exploration expenditure (trend) in Western Australia increased for the eleventh consecutive quarter in the December Quarter 2004, rising by 5.8% ($8.2 million) to $148.4 million. Quarterly growth in the state's mineral exploration expenditure has averaged 4.3% since the June Quarter 2002. Strong global demand for Western Australia's mineral resources continues to stimulate growth in exploration expenditure.
In original terms, Western Australia's mineral exploration expenditure totalled $156.7 million in the December Quarter 2004 - $34.7 million (28.4%) higher than in the same quarter of 2003. Over the period, growth was driven by expenditure on Nickel and cobalt exploration, up by $18.0 million (90.0%), supported by continued growth in the price of nickel and strong global demand. Petroleum exploration expenditure (original) totalled $113.1 million in the December Quarter 2004 - $75.1 million (39.9%) less than in the same quarter of 2003.
Minerals to record increases in production in the December Quarter 2004, compared to the same quarter of 2003, were Diamonds (up 8.5%), Iron ore (up 3.1%) and Nickel (up 2.0%). Decreases were recorded in the production of Zinc (down 53.3%) and Gold (down 10.6%).
Short-term arrivals on holiday
A total of 77,018 overseas visitors arrived in Western Australia by air on holiday in the three months to December 2004 - 1,028 (1.3%) fewer than in the same period of 2003. Contributing to the decline were falls in visitor arrivals from Malaysia (down 2,868 or 29.5%) and South Africa (down 1,613 or 63.1%), although these were partly offset by increases in the number of visitors from Singapore (up 1,069 or 8.1%) and Japan (up 958 or 12.4%).
Short-term departures on holiday
The number of Western Australian residents departing by air on holiday increased to 72,577 in the three months to December 2004 - 19,904 (37.8%) more than in the same period of 2003, and a record level of resident departures for this three month period. The rise in the number of residents departing by air on holiday coincided with a fall in the price of overseas holiday travel and accommodation over the period. Resident departures increased to Indonesia (up 6,383 or 38.4%), Singapore (up 2,539 or 64.8%) and Malaysia (up 1,900 or 51.2%). The only fall in resident departures was recorded to the United Kingdom and Ireland (down 233 or 6.2%).
Western Australia's labour market continued to perform strongly over the three months to February 2005, with the trend estimate of employed persons increasing by 1.5% - well above the national increase of 0.9%. The number of persons employed full-time in the state rose by 2.3% (15,958) over the period, mainly due to a 2.4% increase in the number of full-time employed males. Monthly growth in full-time employment in Western Australia has averaged 0.7% since October 2004, more than double the average monthly growth of 0.3% recorded nationally.
The Property and business services industry in Western Australia recorded the largest increase in employment in February 2005, compared to the same month of 2004, rising by 17,217 (15.2%). Other industries to record strong growth over the period were Construction (up 11,084 or 13.4%) and Government administration and defence (up 7,817 or 23.9%). Several industries recorded decreases in employment over the period, including Wholesale trade (down 6,431 or 12.9%) and Cultural and recreational services (down 4,225 or 17.3%).
The number of unemployed persons (trend) in Western Australia rose by 0.4% (181) in February 2005 - the first increase since September 2003. Over the three months to February 2005, a rise of 2.3% (531) in the number of unemployed females was completely offset by a fall of 2.1% (530) in the number of unemployed males, to leave the total number of unemployed persons unchanged from the previous three months. The state's unemployment rate declined slightly over the period, from 4.6% in November 2004 to 4.5% in February 2005, well below the national unemployment rate of 5.1%.
Overall, conditions in Western Australia's labour market remain tight, with the number of employed persons in the state continuing to grow, the unemployment rate at a record low and businesses reporting difficulties in finding suitable skilled staff.
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