Western Australia faces some challenges this year; however, the overall economic outlook for 2023 remains positive and more robust than other states and territories across Australia.
An evolving two-speed economy?
In Australia, there may be a two-speed economy evolving where Western Australia may not face as many headwinds as the East Coast of Australia. As an example, according to the latest report by the Chamber of Commerce and Industry of Western Australia (CCIWA), WA’s domestic economy is on track to grow 3.5% this financial year, compared to 5.6% last year. This growth rate is the strongest among all states and territories across Australia.
Interest rates are expected to rise further, with three of the Big Four banks predicting the cash rate to peak at 4.1% between May and June 2023. This will impact consumers and businesses, adding further strain to the already high cost of living pressures in WA.
The property market continues to face turbulence, although the momentum of Australia’s housing downturn has eased since September 2022. With housing values recording the first month-on-month rise (+0.1%) since January 2022, movements over the next few months will be critical to watch.
Despite the challenges facing WA’s economy, several industries are expected to perform well in 2023.
Major LNG projects are expected to ramp up investment this year, including Woodside’s Scarborough and Pluto 2 extension, along with several newly announced projects in the resources and agricultural sectors.
The demand for battery metals – including lithium, cobalt, nickel, graphite, manganese, and vanadium – is expected to increase as part of the global green transition. And Western Australia is well-placed to take advantage of this trend, with several emerging lithium projects, including Liontown Resources’ Kathleen Valley project and Covalent Lithium’s Mt Holland project.
The outlook for iron ore pricing is strong due to China’s easing of COVID-19 restrictions and reopening of the economy. However, this increase in demand is not expected to ramp up until the second quarter of 2023.
WA’s construction industry is in a better position than most, with the construction pipeline expected to remain strong and a greater focus on sustainability. Inflation, cost of materials, skills shortages and supply chain issues continue to impact.
The agricultural industry in Western Australia has performed well, with record-busting hauls across the state and sales for agricultural machinery. Grain production and other agricultural commodities leave Western Australia in a strong place, as there is a growing demand for mechanisation and automation technologies and a renewed focus on improving farming productivity and efficiency.
Lastly, with rare earths a sought-after commodity and a substantial percentage of the world’s rare earths originating from China, there is an opportunity for Western Australia to become a significant supplier. Projects like the Yangibana Rare Earths Project in WA’s Gascoyne Region are set to receive significant support from the Australian government in their commitment to reach net zero emissions by 2050 as part of the Northern Australia Infrastructure Facility (NAIF). The project is expected to deliver a forecast $1.3 billion in net public benefit to the Gascoyne region and support around 700 jobs during construction and operations.
Global uncertainty and local opportunities
The global economy remains uncertain as the conflict between Russia and Ukraine continues, and the push to “decouple” China and the United States persists. Western Australia should take the chance to expand its economy and diversify, drawing in investments, new industries and skilled labour.
At Ledge Finance, we are committed to supporting you to achieve your financial goals, whether securing funding for a new asset or growing your business.
Contact us today to see how we can help you navigate the complexities of WA’s economic outlook for 2023.
Please note that the information provided here is general and does not constitute financial, tax or other professional advice. You should consider whether the information is appropriate for your needs and seek professional advice before making any decisions.