As we bid an appeased farewell to 2020 and look forward to 2021, Western Australia is in better economic status than any other state. The impulse we carry into this year is established on the economic return from the state’s success in managing COVID-19.
A steadfast mining sector has paved the way in exports and business investment which has been a huge help even in the past.
Consumer reliance has driven retail spending that exceeds levels seen before the pandemic hit and a rock-solid labour market has recovered back greatly. Western Australia is the only state to have more than recuperated to its pre-pandemic labour market position in both jobs and hours worked.
The state’s budget last year targets an economic growth of 1.25 per cent and 2.75 per cent over the next two years. This shows expectations of an accelerating recovery over the second half of the year 2021.
But what are the variables that could knock WA off track?
First uncertainty: Apprehension relating to the access to government assistance.
As the economy in Western Australia aspires to continue its recovery in 2021, it will do so without a number of supports that are being gradually withdrawn over the course of the year.
The construction industry has benefited highly from WA’s Building Bonus and the federal government’s HomeBuilder schemes, with eligibility for HomeBuilder extended to new-build contracts signed before the end of March 2021.
The incentive from these two programs brings hope to promote a construction pipeline to cover at least the remainder of the year, but this will depend on the uptake of HomeBuilder grants over the first quarter of 2021.
From January 2021, JobKeeper payments have dropped to $1000 fortnightly for employees working at least 20 hours per week, and $650 for those working less than 20 hours. However, in order to keep the JobKeeper, businesses need to show that turnover during the December 2020 quarter was 30 per cent or more below the corresponding quarter in 2019.
Many businesses though were able to recover quickly where they were no longer qualified for JobKeeper.
For others, the lower grant and its withdrawal after March 2021 will add to the stress they already face. Especially in the case of the tourism, accommodation, and food and hospitality sectors, they have continued to suffer from the pandemic. Many entrepreneurs opted to sell their businesses while others continue to pull through. If you’re looking to buy a business, click here for available businesses for sale. See also tips to Effectively Choose a Franchise.
Second uncertainty: Instability relating to WA’s trading connections with its major export partners.
Western’s Australia’s largest exports are directed towards China, which is the top three destinations for seven of WA’s top eight commodity exports.
China has been significantly successful in containing COVID-19 and prompt measures have strengthened China’s economic recovery. WA benefited from this especially in the high demand for steel. However, agricultural and wine export trading tensions between Australia and China have also created uncertainties.
The risk of continued trade interruptions with China highlights the importance of WA to extend operations not just in production, but in export markets as well.
Third uncertainty: Reservation relating to the stability of the currency.
The Australian dollar value has increased over the past year to US78 cents by January, sustained by a high iron ore price and Australia’s response to COVID-19.
We can expect the Australian dollar to remain above US70 cents within the year 2021, making exports more costly and less competitive.
How Western Australia is handling the COVID-19 situation is one of the main factors supporting our economy. However, it inevitably highlights a second wave as a major threat to the state’s continued recovery.
And here draws the pressure.
Although the “island within an island” strategy has worked for WA up until now, we will need to loosen some restrictions at some point during 2021 to meet progress goals for WA’s economy, and to get the full benefit on domestic and global opportunities.
Source: WA bright spot amid clouds By Alan Duncan | Businessnews.com.au