Although Western Australia continues to record strong economic growth, economic uncertainty and small business pain has seen the Chamber of Commerce and Industry (CCI) revise down economic growth forecasts for the current financial year.
According to the CCI’s latest quarterly outlook, the European debt crisis is the biggest threat to the state’s economy, as it risks spreading to the global economy and key trading partners in Asia.
The CCI now expects the economy to grow by 51.25 percent in 2011-12, one perecentage point less than September’s forecast.
Rising investments in the resources sector could see business investment rise by 20 percent this financial year, and as a result, the domestic economy could grow by as much as 71.25 percent during 2011-12.
Despite this, CCI chief economist John Nicolaou said local small businesses are no longer experiencing growth, thanks to poor sales, declining profits, rising costs and the tightening labour market.
“Other risks on the horizon include the imminent introduction of the Federal Government’s carbon and mining taxes. These will add a further layer of uncertainty for business at a time when they least need it,” he added.
The CCI has also undertaken economic modelling to assess the impacts of a major global downturn would have on the West Australian economy, if it were to occur.
“The research shows that economic growth in WA would be 11/2 percentage points lower over the next financial year.”
“CCI believes the State would be well placed to withstand such a shock due to our close links with developing Asia and the volume of projects in the pipeline for development,” Nicolaou added.