‘Extended Prosperity’ in WA

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‘Extended Prosperity’
6 November 2009

Reserve Bank Deputy Governor Ric Battellino told a conference in Perth today that Australia faces an “extended period of prosperity in the years ahead,” driven by foreign investment in mining, that will put strain on the country’s housing and labor markets.

“Workers are likely to be in short supply, leading to strong demand for skilled migrants and therefore fast population growth,” Battellino said. “This, in turn, will have flow-on effects for housing markets.”

The economy will continue its expansion in 2011 and 2012 as companies boost investment in resources, including Western Australia’s A$43 billion ($39 billion) Gorgon liquefied natural gas project owned by Chevron Corp., Exxon Mobil Corp. and Royal Dutch Shell Plc, the bank said in today’s quarterly monetary policy statement.

“Growth in business investment and exports is expected to be strong, underpinned by the ongoing expansion of the resources sector,” the bank said. “The outlook for Australia’s terms of trade has also improved, with some increase now expected over the next year or two.”

SOURCE: Bloomberg

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12 November 2009 - see full article here: WA Business News (http://www.wabusinessnews.com.au/en-story.php?/1/76655/WA-facing-150-000-workers-shortfall/dba)

A substantial fall in the state's unemployment rate to 5 per cent has sparked concern that WA is not ready for the next wave of growth, with a business lobby group projecting a shortfall of 150,000 workers within seven years.

Today, WA recorded one of the country's lowest jobless rates, falling from a revised down 5.7 per cent in September to 5.0 per cent in October.

It is the state's lowest unemployment rate since April and is more than double the October 2008 jobless rate of 2.3 per cent.

Chamber of Commerce and Industry chief economist John Nicolau today said the sharp fall in the number of Western Australians looking for work - from 69,600 to 60,600 - is a further sign the local economy is gearing up for a new period of growth and opportunity.

"The brighter economic outlook, after what has been a difficult year for many local businesses, does not come without its challenges," he said.

"Time is running out for State and Federal Governments to ensure the State is ready for the next wave of growth.

"Heading the list of challenges is labour shortages.

"A growing number of Western Australian employers are becoming increasingly concerned they won't be able to find the workers they need.

"CCI forecasts the State will need an extra 400,000 workers within seven years. Based on current projections, we are likely to fall 150,000 workers short."

Mr Nicolau added the Barnett government could help by accelerating its workforce development strategy while the federal government can make it easier for employers to hire overseas workers to fill positions that cannot be met by local workers.

"These challenges must be addressed as a matter of priority to ensure the State stands ready, and can make the most of the many opportunities headed our way," Mr Nicolau said.

Meantime, the rise in total employment nationally will give the Reserve Bank of Australia confidence to lift interest rates for a third straight month in December, economists say.

The nation added 24,500 jobs in October, the ABS said.

The median market forecast was for total employment to have fallen by 10,000 in the month.

AMP Capital Investors chief economist Shane Oliver said the jobs figures have raised the prospect of an RBA interest rate rise in December.

"The odds are now tilted back in favour of a rate hike," Dr Oliver said.

Dr Oliver said the labour force report, along with the NAB business survey and consumer confidence report published this week, showed the economy was "withstanding the shift to gradually higher interest rates".

"That would embolden the RBA to tighten again in December," Dr Oliver said.

The RBA has lifted the cash rate by 25 basis points, or 0.25 percentage points, at the past two monthly meetings.

The cash rate sits at 3.5 per cent.

The number of full-time jobs rose by 2,900 in October, while part-time employment was increased by 21,500.

The nation's jobless rate crept up 0.1 percentage points in October to 5.8 per cent.

The unemployment rate has moved between 5.7 and 5.8 per cent for the past six months.

Dr Oliver said he would be "extremely surprised" if the unemployment rate rose much further.

"We've turned the corner," Dr Oliver said.

"I think it is more confirmation that we've either seen the peak in unemployment or we're pretty close to it.

"I think the more likely scenario is we'll spend several months bouncing around current levels before we start falling through next year."

The Australian dollar reacted positively to the data.

The local currency was trading at about $US0.9311 just before the figures were released at 1130 AEDT, and rose to $US0.9367 shortly afterwards.

Commsec economist Sevanth Sebastian described it as a "great result" for employment, in line with what the market was expecting.

It left the door open for the Reserve Bank to either raise rates or keep them on hold in December.

"Really you're seeing that shift still in place between part time and full time," he said.

"We were expecting job creation rather than job destruction and that's really what we've seen."

He forecast the unemployment rate would peak at six per cent, despite tracking "marginally higher" in the latest reading.

"We believe the peak in unemployment is just around the corner and the six per cent mark is looking more and more likely on a monthly basis as the data comes through."

The Reserve Bank's "hint" of an improvement in labour market conditions in its monetary policy statement last week had been confirmed in Tuesday's NAB business survey, he said.

"It suggests the Reserve Bank may have the opportunity to raise rates in December if they want to.

"I think it's going to be a line call.

"They've never raised rates three months in a row in history, so they do have the opportunity to hold off if they want to, but it will probably come down to the day."

He said the 0.1 per cent growth in unemployment was not of any concern.

"The trend of the data in terms of employment indexes from business confidence, the anecdotal evidence we're seeing at the moment, with businesses bringing back some of the investment projects that they put on hold all suggests that employment and the labour market will pick up and I think the ANZ job ads really confirmed that over the last few months."