As predicted in our 2011 study; 2012 saw a number of construction projects come to an end and transition into production. Over the next 12 to 18 months this trend to the production phase will continue as major resource projects near completion.
We will then move into the operational phase where production will ramp up and the full economic benefits will be felt by governments and the wider community. At the same time we sit in a period of escalating costs for the sector and broader market uncertainty. The increasing costs of doing business in Western Australia can be attributed to a number of factors such as a tight labour market, an increase in red and green tape, push for cost recovery of government services and policy positions that seek to spread the benefits of the resources sector further than they already are. In addition we are seeing fluctuating commodity prices and increasing difficulty in gaining access to capital.
While there may be some troubling signs, this version of the State Growth Outlook still paints a positive outlook for the Western Australian resources sector. The latest study reveals investment in the sector remains strong, and while supply side issues are starting to be addressed, this remains a major inhibitor to increased growth. Labour productivity in the mining sector alone is the highest of any industry in Australia. However, this has been in decline due to the sector’s rapid growth. We will see a rationalisation of operational efficiency as a result of declining commodity prices and increases in the cost of doing business which will influence overall productivity.
The study also shows the sector’s energy needs will continue to grow. The emerging domestic onshore gas industry and increased capacity may play a role in addressing an emerging tighter domestic gas market. While water use will continue to increase there will be new opportunities for other sectors and communities from dewatering. An underlying theme of previous State Growth Outlook studies is the need for a long term vision and planning. The 2013 study is no different. As the sector moves into a new phase it becomes even more imperative the government, industry and community work together to find and construct the projects that will ensure Western Australia’s economic development into the future. Only then will we continue to experience the prosperity derived from a strong sector.
The State Growth Outlook study is based on an industry survey of development intentions focusing on the implications for the key growth enablers of people, energy and water. Included in the 2013 version is a better understanding of the sector’s infrastructure requirements. This version looks at hard infrastructure – roads, rail, port and aviation – and social infrastructure. We have also included commentary on sector productivity.