Wednesday, September 01, 2010

Okay, so we are being showered in money, but maybe things aren't booming.

Shane Wright in the West Australian:

The last mining boom helped lift the entire WA economy.

But there are signs that mining boom mark II may be different, with a growing threat that key parts of the economy – and the people employed in those sectors – could be left behind.

Since several major elements of the Federal Government’s stimulus program ended with the new year and the Reserve Bank lifted interest rates the WA economy has shown signs of strain.

These are not evident in the mining sector. Even at the height of the mining tax brouhaha, mining investment plans soared to record highs while mining profits reached an all-time record of $25 billion.

But those strains are clearly evident in the rest of the economy.

House prices, after lifting about five percent in second half of 2009, have improved just 0.3 percent since January, while unit prices are down one percent.

New home sales are at a six year low while dwelling approvals have fallen off a cliff, down 25 percent since February.

In the retail sector the story is no better....

Sales of household goods have fallen by 7.1 percent since January, clothing sales are down by 8.6 percent, hardware and garden supplies are off by 15.9 percent and furniture covering purchases have tumbled by 6.6 percent.

Even food sales, which should be rising in line with population growth, have gone nowhere.

If not for all the cash flowing through the mining sector these figures would suggest the WA economy was not travelling well.

The lack of activity outside of mining may be a hangover from the excesses leading up to the global financial crisis and the rise, as RBA governor Glenn Stevens has described, of the new "conservative consumer".

The big mortgage, the personal loans for a 20 foot runabout or a backyard pool, may have caught up to West Australians who are just paying off a few loans.

If not, then there are some problems ahead for WA business, the WA Government and who ever ends up with the keys to the Lodge.