An increase in retail spending, a growing population and improved housing finance figures suggest positive times ahead for Western Australia’s economy, according to CommSec chief economist Craig James.
An increase in retail spending, a growing population and improved housing finance figures suggest positive times ahead for Western Australia’s economy, according to CommSec chief economist Craig James.
Speaking to Business News on a recent visit to WA, Mr James said the outlook for the state had more upside than a few months ago.
“We’ve got retail spending growing at a 3.3 per cent annual pace, the fastest in six and a half years,” he said.
“That shows retailers are doing a bit better.
“In a real sense, retail trade is growing at a 1 per cent annual rate, the fastest in four years, so it’s not just all prices.”
Retail turnover was just more than $2.9 billion in trend terms for the month of December, according to the latest data from the Australian Bureau of Statistics.
Growth at a nominal pace of 3.3 per cent against December 2018 was the fastest rate since the year to May 2013.
Mr James said some of the data around the property market was equally encouraging.
One is the measure of new loan commitments for owner-occupier households, with loans totalling nearly $1.2 billion in December, according to the ABS.
“Housing finance is growing at a 15.4 per cent annual rate, which is the fastest in five and a half years,” Mr James said.
“Population growth is now growing 1.1 per cent here in WA; it was growing as low as 0.6, we’re well and truly off the low point.
“All those figures are quite encouraging.
“The [rental] vacancy rate is now down to 2.1 per cent.
“The normal figure is 3 per cent when demand and supply are in balance ... [so] demand is exceeding supply.”
Perth was also part of a national trend on improving house prices, he said.
“The other thing boosting confidence, boosting spending, is that home prices are starting to rise again; even in places like Perth, home prices are starting to lift,” Mr James said.
“The fundamentals have started to swing back towards excess demand rather than excess supply.”
He said tax reform and more rail infrastructure should be the key focus for governments to make Australia more competitive.
“Things like the internet and globalisation mean that Australia can now compete with overseas businesses,” Mr James told Business News.
“Here in Australia we need to be doing more in terms of providing individuals with the opportunities to work outside capital city centres.”
That meant better rail connections for cities such as Bunbury, Bendigo and Wollongong.
“If they were serviced by very fast rail, and you were able to get commute times less than an hour, that would open opportunities for people to set themselves up in regional areas,” Mr James said.
Tax reform should be another priority.
“Personal tax rates are still too high,” Mr James said.
“If we were able to increase the GST and reduce personal tax rates, that would encourage people’s ability to engage with the job market.”
Data from Australia’s 2020 financial year budget shows direct taxes, such as company tax and individual income, will raise about $343 billion, while total receipts will be around $505 billion.
Despite two major income tax cut packages announced in 2018 and 2019, research by the Australian National University reportedly indicates there has been a significant increase in the tax rate paid by average workers during the past decade.
That has the impact of potentially discouraging labour force participation, among other consequences.
Mr James said it would be important to ensure those at the oldest and youngest ends of the workforce, and women of all ages, were incentivised to participate.
