PERTH (miningweekly.com) – Western Australia’s economic growth was expected to slow to 2.6% during 2014/15, as the state’s resources sector transitioned from a construction to production phase, advisory firm Deloitte Access Economics predicted on Tuesday.

In its latest edition of the Western Australian Business Outlook, Deloitte Access Economics noted that the state’s growth rate would pick up again to 4.4% by 2015/16.

Meanwhile, export volumes were forecast to rise by 6.4% in 2014/15, followed by a further 7.6% rise in 2015/16 and 10.6% in 2016/17, reflecting higher production from the resources sector.

Higher volumes of iron-ore exports were expected to drive a 6.4% growth forecast for exports in 2014/15, from project expansions nearing completion, as well as miners achieving greater run rates from targeted productivity and efficiency measures amidst a weaker price environment.

This strong growth was expected to continue through to 2018/19, as the major liquefied natural gas projects currently under construction reached production phase.

“But exports don’t have the same positive benefits to an economy as an investment-led boom. Unwinding resources sector investment, jobs and spending impacts are not as significant and, not surprisingly, private commercial resources construction and its stimulatory impact falls away,” Deloitte Access Economics’ Western Australia practice leader Matt Judkins said.

He added that while the headline growth figures were encouraging, they also hid weaknesses creeping into the state’s economy.

“Western Australia’s great resources-fuelled story is well documented. But the transition from resources investment and construction to exports is going to come with some pain.”

Unemployment rates were expected to rise from 4.9% to 5.3% in 2014/15, and further to 6.0% in 2015/16, while private commercial construction was expected to decline by 18.1% to A$39.2-billion in 2014/15, followed by a 19.2% decline to A$31.7-billion in 2016/17.

“The reality is that the party’s over for Western Australia,” Judkins said.

“This rather positive gross state product outlook hides an economy that is looking decidedly weaker, and further key commodity price weaknesses remain a significant risk.”
 
Judkins pointed out that the decline in commodity prices has also been reflected in the state budget bottom line. With revenue from resource royalties drying up and a struggle to keep expenditure growth under control, total public sector net debt is estimated to be A$25.4-billion in 2014/15 rising to A$30.9-billion in 2017/18, according to state Treasury.