Senator the Hon. Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Date: Saturday, 5 March 2016
For a long period, Western Australia was the best-performing economy in our nation. WA was the engine room of national growth on the back of record prices for our key commodity exports, which helped attract massive new capital investment and drove unprecedented construction activity in the state.
The entrepreneurial spirit of hardworking West Australians helped maximise those opportunities, significantly contributing to our national prosperity.
Now, the WA economy is feeling the transition from resource investment and construction-driven growth to broader drivers of economic activity and growth more heavily than other state economies.
As a commodity-based trading economy, WA and its people have long understood the effect of commodity price cycles on the local economy.
At present, prices for our key commodities including iron ore, oil and gas are very low compared with where they have been.
When the price of a commodity such as iron ore - which represented more than 20 per cent of our national export income out of WA - goes from $US180 a tonne to less than $US40 a tonne in less than four years, that inevitably has an impact through the whole economy.
Lower prices for our key commodity exports have contributed to the lower value of the Australian dollar.
This has helped with the economic transition in WA, as it has in other parts of the country, with other parts of the economy becoming more competitive again internationally as a result.
The record capital investment channelled into major resources projects across WA over the past decade or so has also significantly increased our productive capacity and, as such, production and export volumes of commodities such as iron ore and LNG, which has helped cushion the price effect.
Lower prices have forced relevant businesses to look closely at their cost structures, with a view to ensuring we are as competitive internationally as we possibly can be. All this gives us a healthy foundation from which to seize future opportunities when prices inevitably recover down the track.
However, we can’t just sit back and wait for commodity prices to recover. This is the time when we need to ensure we have our house in order and are as match fit as possible.
Our ambitious free-trade agenda, locking in export agreements with China, Japan and South Korea, and now working on another such agreement with India, presents great opportunities for WA exporters, in particular in our agricultural and services sectors.
As well as agricultural exports, education, training and health services and tourism present great opportunities for us to continue diversifying our economic base.
High-end manufacturing in relation to major defence acquisitions in future present great opportunities for WA’s shipbuilding industry in particular.
This is also the time when we need to pursue the necessary investment in productivity-enhancing trading infrastructure.
Efficient freight routes through to our various ports are a critical piece of that jigsaw.
During the resources investment and construction boom building public infrastructure across WA was comparatively expensive. It is now much cheaper.
We need to strike now while construction costs are lower to set ourselves up for the next few decades of growth in WA.
As a trading state, we need to ensure we are in the best position to get our products to market at the lowest possible cost, safely and with minimum disruption to local communities across our metropolitan freight routes.
That is why it is so important that the WA government gets on with building the Perth Freight Link project. All of it.
The federal government has already committed $925 million towards the construction of this project. The Prime Minister has publicly announced we would be prepared to increase that contribution if the WA government decides to pursue the tunnel option from Stock Road. When making the commitment in 2014 we agreed with the WA government that construction would start in 2016.
Out of 93 infrastructure priority projects identified by Infrastructure Australia around the country, the Perth Freight Link project is the highest priority project nationally yet to begin construction.
We stand ready to work with the WA government to get this done as quickly as possible as a key initiative to help our state work through the current economic transition and to invest in our great state’s future economic success.
This is an opinion piece published in The Weekend Australian on 5 March 2016.
Karen Wu - 0428 350 139