March 07, 2020 09:15:13
Mark McGowan is bracing for an economic storm.
“Clearly this is a threat to the world’s economy,” the WA Premier said this week, reflecting on the growing coronavirus crisis.
“I am concerned about the impact on tourism, international students and the broader economy.”
The virus, which has WA health authorities bracing for a pandemic to hit our shores, is already having economic impacts — particularly on the tourism sector, which has been hit by cancelled flights and tourists staying away either due to travel restrictions or personal welfare concerns.
But economic officials fear the impact so far will just be the tip of the iceberg.
With COVID-19 hitting China much harder than any other country, Treasurer Ben Wyatt is concerned demand in that nation for steel could shrink significantly.
That would inevitably hit West Australian iron ore producers and, in turn, a state economy still hugely reliant on mining — which of course comes on top of other potential impacts, such as the tourism market slipping further or consumer spending being hit.
WA is hardly unique on this front but the threat of economic pain caused by coronavirus appears to be substantial.
WA economy ‘in fragile state’
According to data released this week, it is not a case of a thriving WA economy at risk of being brought back to earth by a global pandemic.
It appears WA had serious economic headwinds long before coronavirus sparked a worldwide panic.
Data from the Australian Bureau of Statistics showed the West Australian domestic economy shrunk in the last three months of 2019 — the third quarter out of the past five in which state final demand has fallen.
The summer bushfire crisis, which had a far bigger impact in the east than it did in WA, is being blamed for sluggish retail trade figures for January, but the decline in turnover in the west in January was actually the second-worst in the nation.
Youtube: Impact of Coronavirus on Australian economy to be worse than bushfires
On top of that, building approvals fell yet again in the first month of the year, now down 16 per cent in two years, while the unemployment rate rose significantly to 5.8 per cent and is now the third-highest in the nation.
According to the business lobby it paints a concerning picture.
“WA’s economy has sailed into the oncoming COVID-19 storm in a fragile state,” Chamber of Commerce and Industry chief economist Aaron Morey said.
“Prior to COVID-19 hitting, the WA domestic economy was shaky.”
Stimulus cash not enough in face of global slowdown
The threat of a recession across the country has the Federal Government preparing a large stimulus package and WA has previously committed to a $10 million tourism assistance package focused on boosted marketing and discounted flights.
But Wyatt has played down the prospect of a large-scale, broad stimulus package in WA, casting doubt over how large an impact it would have.
“If there is a global slowdown, no amount of stimulus out of WA is going to have an impact on that so we have to be careful and measured,” he said.
“Stimulus has to be in an area that works, we are not just going to spend money because people like the idea of a government spending money.”
Wyatt pointed out WA now was in a position to respond if need be, because of its improved budget position — even with that bottom line likely to be affected by declines in GST revenue and iron ore volumes should the coronavirus situation deteriorate.
Even with those threats looming, the State Government is attempting to remain upbeat.
“The WA economy is in better shape now than it was when the McGowan Government came to office and the WA Treasury has projected stronger growth to come,” Wyatt said this week.
But with plenty of data now indicating the WA economy had significant problems before the outbreak, concerns are likely to be high within McGowan Government ranks about what it could look like once the full impact of coronavirus is felt.
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