Staggering amounts of Australia’s wealth come from the plains of Western Australia, and Australia’s mining capital tops its east coast counterparts in a range of key economic indicators.
Commonwealth Bank data released last month shows that Sandgrowers in the west lead the country in unemployment, private sector growth and domestic economic activity; the latter does not even take into account resource exports.
But they do export for sure.
Western Australia accounts for two-thirds of Australia’s resource exports, and the Western Australian Chamber of Minerals and Energy said its members paid 20% of the country’s corporate tax bill last year.
There are more businesses registered in Western Australia than any other state or territory, but only 10% of Australia’s population lives there.
Iron ore contributes a quarter of the state government’s income, and 88% of royal revenue comes from iron ore.
Chinese demand for the metal was the start of Western Australia’s golden age. The boom has been given a second boost by the energy transition, which requires far greater quantities of rare earths, Ray da Silva Rosa, a professor at the University of Western Australia’s Business School, told Newswire.
“The price of iron ore, due to demand from China, has remained at levels much higher than anyone could have predicted,” said Professor da Silva Rosa.
“This decades-long boom is a function of three factors specific to Washington state: First, the state’s geological makeup provides such high concentrations of diverse minerals that if one or two minerals go out of business, the slack is likely to be picked up by demand for another mineral.”
Mining companies have worked for decades to figure out how to extract their resources in extremely remote locations.
“This is why many (mostly small) mining companies with operations in Africa, Asia and even Europe have their headquarters in Perth,” said Professor da Silva Rosa.
The third axis is high safety standards and technical expertise.
“The mining industry is more technologically advanced than many Australians realise,” he added.
“It’s not about getting a few shovels and digging things out of the ground.”
The double advantage of these huge money-making projects is that the success of the resource sector has left little or no room for onshore processing.
“It’s a version of the Dutch disease,” said Professor da Silva Rosa.
“This means displacing other sectors from development while one sector is very profitable.”
The state could have processed more to add value, but the incentive to make this expensive additional investment is missing.
“The problem we have is that all our resources are at full capacity extracting resources, and the profits are so good that it is very expensive to develop the infrastructure and expertise needed for further processing,” said Professor da Silva Rosa.
CommBank’s latest quarterly economic report, released in June, said people were choosing to move overseas and interstate to Western Australia.
“Western Australia’s economy remains the strongest in the country, with economic opportunities attracting migrants from other states and overseas to the state,” the report said.
“Consumers in Western Australia are also experiencing the highest level of spending growth in the country.”
Wages are 4.2 percent above the national average.
The report noted that “Western Australia is the only state in the country where the private sector contributes more than 50 per cent of annual economic growth.”
But there is a flip side. Although house prices in Western Australia are cheaper than Melbourne, Sydney and Canberra, they are rising.
The vacancy rate in healthy rental housing is around 3%, while the vacancy rate in Perth is just 0.4%.
The intense pressure is sending rents soaring above the high-rise buildings of BHP, Rio Tinto and South32 that dominate the Perth skyline.
However, the monopolies of the big players put the country in a strong position when negotiating with China.
BHP, Rio Tinto and FMG have dominant market shares, and Chinese buyers are more fragmented, said Professor da Silva Rosa.
“Chinese interests may try hard to organize themselves as a bloc to confront the producers, but they find it very difficult to maintain any pressure on the producers,” he added.
“This means that a large portion of the value goes to the producers.”
The removal of Chinese tariffs on wine and lobster also helped the state’s economy.
Western Australia Chamber of Minerals and Energy CEO Rebecca Tomkinson knows the state is a powerhouse.
“Western Australia’s role as a strategic part of the global energy future and our position as Australia’s economic powerhouse is no secret to our trading partners, as evidenced by recent visits to Perth by key international diplomats,” Ms Tomkinson said.
Chinese Premier Li Keqiang visited Australia in June.
He’s travelled around the country, but the picture of the handshake with Anthony Albanese in Perth was of course in Kings Park, with a sweeping view of the towering buildings of BHP, Rio and South 32.
Replacement projects are adding additional tonnes, with Western Australia’s iron ore consumption expected to rise to 893 million tonnes in the next three years.
“Western Australia has a stable economy and the continued economic and social contribution of our resources sector plays a significant role in that,” Ms Tomkinson said.
