Border closures will continue to act as a millstone around the neck of the Western Australian economy because the labour shortages resulting from lockdowns limit the state’s ability to grow, according to CPA Australia.
The accounting body took a deep dive in the recent Western Australian state budget and found that the policy of lockdown shut out usual sources of labour for companies operating in the state.
Dr Jane Rennie, the accounting body’s general manager of external affairs, said the lockdowns might impact on the ability of the government led by Premier Mark McGowan to implement initiatives contained in the budget.
““Labour shortages go hand in hand with wage pressure. WA currently has the fastest growing wages in Australia. Big business can better withstand short-term wage growth, but this may well challenge the profitability of WA’s small business sector,” Rennie said.
CPA Australia noted that the Western Australia is the only state or territory with an economy in surplus, revenue grew during the 2020-21 financial year by 25 per cent with iron ore royalties helping to that growth in revenue along by contributing $11.3 billion to the state coffers.
Economic growth of 3.25% during the previous year as well as a falling debt level add to the success story, CPA Australia said, but that does not mean the good times will continue.
“Physical isolation from the rest of the nation has allowed mineral extraction to continue uninterrupted. As a result, WA has recorded a growth rate stronger than almost anywhere in the world,” Rennie said.
“Iron ore royalties, which flow directly to WA rather than the Commonwealth, have delivered rivers of gold into the state’s coffers, but this may slow before too long.”
The policy of locking Western Australia down has meant pandemic related spending has been lower than initially forecast but the state budget allows for another $487 million to help with pandemic-related measures.
“In the event of a COVID-19 outbreak, the size of today’s health care announcement is likely to look very light on. With no shortage of money in the government’s back pocket, spending more on health now might have been worthwhile,” Rennie said.