Not all that Glitters is Necessarily Gold

19 Sep 11

Whilst the 2 speed economy is clearly evident in Australia, Western Australia's mining powerhouse economy is said to be the patchwork state.

Whilst the mining boom fueled by Asian demand for natural resources is resulting in the rise of mining profits and employee earnings are booming at 7.4 per cent, nearly double the national average, the apparent wealth is not being seen by the remainder of the Western Australian economy with jobs being shed in the construction, retail and manufacturing sectors.

Western Australian new home sales and building approvals have fallen to a 10 year low. Retail is said to also be suffering, exacerbated by many new retail outlets opening just a few years ago to capture what was then, a prosperous market, that is now characterised by a more cautious consumer. While Western Australians are still making money, they are not spending it according to Western Australia's Retail Traders Association.

Western Australia's unemployment rate, whilst still the lowest by national standards, rose to 4.4 per cent in August. The unemployment rate was just 2.8 per cent in 2008. Western Australia's economy has employed only 46,000 more people in the last 3 years compared to 138,000 in the 3 years leading up to the original global financial crisis. Back then if someone had a heartbeat they would be employed.

The Western Australian manufacturing sector is also suffering with the need to pay employees significantly higher wages than the national average as it competes against the resouces sector for labour. This in turn is making it more difficult to compete against Asian imports, particularly in light of the strong dollar and the apparent lack of domestic manufacturing work being driven by the resources sector.

The recently announced federal government Resources Envoy, to secure resource sector manufacturing at home, certainly has a task ahead of them.