A new report by the Bankwest Curtin Economics Centre at Curtin University has found international trade and a thriving mining and resources sector are to thank for the prosperity of the Western Australian economy despite the COVID pandemic, and that diversification is the key to ensuring the state seizes emerging trade opportunities, including those arising from a global shift toward decarbonisation.
Released today, the ‘Trading Up: International Trade Futures and the Western Australian Economy’ report calls for increased export diversification, leveraging Australia’s and WA’s strengths in production that meets the world’s growing ‘green’ or decarbonisation agendas.
Modelling in the report shows that international trade directly benefits Western Australian families through higher income, more jobs and lower prices.
Trade benefited WA households to the tune of $17.9 billion in 2022, worth $16,200 for each household in the state, and reduced prices by 4.3 per cent compared to a counterfactual situation of no trade.
Report co-author and Bankwest Curtin Economics Centre Director Professor Alan Duncan said WA’s economic resilience to the pandemic had been the envy of other states, with goods exports in 2021-22 accounting for 59 percent of the WA economy as measured by Gross State Product (GSP), compared to national exports which contributed 23 per cent to the Australian economy.
“The relative scale of WA’s export sector emphasises just how much the state benefits from – and depends on – its economic relationships with trading partners,” Professor Duncan said.
“The WA economy benefits from natural endowments, product specialisation and market integration as well as economies of scale, and its resilience through the COVID pandemic owes much to border protections that allowed mine sites and ports to maintain production cycles”.
The report found the free trade agreements (FTAs) Australia has signed with countries including China, Japan and the USA have led to huge financial gains for Australian exports. Overall, FTAs with China, Japan, South Korea and Thailand led to estimated gains of $472 billion for Australian exports since each trade agreement was enacted.
But the report also foreshadows a growing level of protectionism among a number of trading partners and preferential domestic economic support for key industry sectors.
“The rising level of protectionism poses risks to open economies like Australia, particularly export-oriented states such as Western Australia,” Professor Duncan said.
“This emphasises the importance of the government’s ongoing work to deepen relationships with key partners and secure free trade agreements that are to our mutual benefit.”
The report highlights the future opportunities for Australia – and especially for Western Australia – that stem from the global decarbonisation agenda and the transition to net zero carbon emissions.
The WA economy ranks 12th in the world for complexity in renewable energy and decarbonisation technologies according to a new ‘green’ economic complexity index developed by the Bankwest Curtin Economics Centre.
The green economic complexity index indicates that WA is well positioned in green products capability – products that are identified as instrumental in the transition to net zero carbon emissions.
Report co-author Dr Daniel Kiely from the Bankwest Curtin Economics Centre said this week’s announcement by the state government of $148 million under the Investment Attraction Fund was a good step in moving forward the state’s diversification agenda.
“The scope of the 40 projects announced under the Investment Attraction Fund – including tourism, renewables and regional development – show the state government is putting the meat on the bones of their diversification strategy, which, as we’ve said in this report, is essential in moving beyond WA’s heavy reliance on the resource sector for its continued economic success,” Dr Kiely said.
The report also found that trade tariffs and border restrictions had negatively impacted trade services in both WA and nationally, however sectors such as international education, tourism, and some agricultural-related exports were emerging from the crises.
“Continued investment should be made in the WA brand to support the tourism and international education sectors in key and emerging markets,” Dr Kiely said.
At the same time, housing supply issues must be addressed to support the accommodation needs of skilled workers, international students, hospitality workers and tourists across the state.
Professor Duncan said that Australia – and especially Western Australia – is in an enviable position to capitalise on these emerging opportunities as long as it gets on the front foot when it comes to industry diversification, housing, infrastructure and trade development strategies.
“We need to diversify our export products and export markets to meet global demands in renewable energy and decarbonisation technologies; we need to support innovation and develop distinctive, differentiated and high value-added goods and services; and we need to focus on future skills needs,” Professor Duncan said.
“If we get it right, Australia is in a tremendous position to benefit from the changing face of global trade.”
