Mining Slowdown Now Affecting All of Western Australia

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Researched by Industrial Info Resources Australia (Perth, Australia)--The slowdown in the Western Australia mining sector has been covered extensively in the past three to six months, and its effect on the Western Australian economy as a whole is coming to the fore. While the state has been seen as the engine room of the national economy over the past three or four years, it seems that now may be the time to stop for fuel.

The drop in commodity prices, the tightening of financing markets, and the general negative view across the mining industry have caused multiple projects to be delayed or cancelled over the past six months, with many commentators calling it the end of the mining boom. This large drop in expected capital expenditures is highlighting the weaknesses in other parts of the economy, particularly the housing and retail sectors.

Western Australia's latest unemployment figures were released earlier this week, and they do not paint a pretty picture. The unemployment rate has risen from 3.5% in May 2012 to 5.2% in April 2013. While the unemployment figures alone do not give a full indication as to the health of the economy, many commentators are already signalling that this could be the start of a recession. Western Australia has not experienced a recession in more than 20 years, so this is indeed a big call.

To add fuel to the fire, the Australian Bureau of Statistics also released the latest national account's figures yesterday which, while showing that the entire economy is still growing 2.5% annually, showed that Western Australia's final demand figures dropped by a massive 3.9% over the same period. These figures do not take into account imports and exports, however, and with Port Hedland recently announcing record exports for the month of May, the overall figures may not be as bad as is being made out. If exports are included in the figures, then Western Australia would be shown to be growing at a considerable rate.

These figures highlight that coming off of the back of the largest mining boom in Australian history and with capital expenditure levels now beginning to drop significantly, the economy is moving from a large expansion phase into a more sustainable ongoing production phase. Whether the transition will be a smooth one--and whether the rest of the economy is able to pick up the slack--is yet to be seen.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.