WA’s future looks bright (The Australian)
WA’s future looks bright
The Australian Friday 13th May 2016 – Author Bernard Salt
There comes a time in the rhythm of Perth’s life when everything seems bad. There is no good news or there is very little good news. Perth and indeed Western Australia is in such a time right now. The last good year of the mining boom was calendar 2012; within a year it was painfully evident that the boom was over. Whichever dataset is consulted it is difficult to find positive trends in the west over the last three years.
Perth added 70,000 residents in the year to June 2012; it was at the time the fastest growing capital city in Australia in percentage terms. Figures for the year to June 2015 show the city tracking annual growth of just 30,000. And that was nine months ago. It is quite possible that Perth is now tracking annual growth of closer to 20,000. Growth, but growth at a scale of barely one-third that of the peak of the boom.
The problem is that often times expectations of demand are set at the peak of the cycle and it can take a few years until the community readjusts to a new lower growth reality. Property and business prices and thinking adjust slowly over time. Perth is now in a state of adjustment and has been since 2013. Long-term residents and business operators well understand the west’s cycle of growth and development.
The fact is that Western Australia is a frontier community with a thin population base. When the cycle turns down in one industry such as mining, there is insufficient scale in other sectors to cushion the fall. But the west has been through these cycles before (such as the early 1990s and the early 2000s) and it will go through them again (maybe the late 2020s). But for the astute business operator with faith in the future of the west these cycles represent opportunity: now is a time for expansion and investment.
Western Australia is richly endowed with resources in a region and in a world much in need of iron ore, bauxite and liquefied natural gas. It is also well positioned strategically to serve as a base for military back operations and well as a base for transportation and logistics businesses that must service the western half of the continent. Perth is a lifestyle city capable of delivering quality education, healthcare and cultural services. But perhaps most importantly Perth is located within the same time zone as coastal China as well as Hong Kong, Singapore and other important Asian cities.
What the rest of Australia and perhaps much of Asia doesn’t understand about Perth is that it is one of Australia’s, and the world’s, most multicultural cities. Some 41 per cent of the Perth population was born overseas; this proportion for Sydney is 42 per cent; for Melbourne and Brisbane it is less than 40 per cent. By this definition Perth can only be described as being welcoming of migrants. Indeed Perth has a greater ethnic eclecticism than does Greater New York, where just 29 per cent of the population was born overseas. Even London, regarded as one of the world’s great melting-pot cities, has a lesser proportion of migrants (36 per cent) than does Perth.
Much of Perth’s eclecticism has derived from strong levels of English migration after WWII, but more recently this has been augmented with Asian student populations. And the global composition of Perth is mirrored through the reach of the airport. Direct flights connect Perth with Mauritius, Singapore, Kuala Lumpur, Jakarta, Guangzhou, Hong Kong and many other cities. Perth connects directly with 18 international cities; Adelaide with eight (soon to be nine). Sydney connects with 45 global cities; Heathrow with 175.
Global cities offering quality of life and commanding vast resource-rich hinterlands in areas of rising military interest are surely places to watch in the 2020s and beyond. Perth and the west tick all the boxes, or at least they did while the boom was running hot. The question for long-term investors in the west and in Perth is whether there will be continued or even rising demand for what the west has to offer. Will there be rising demand for West Australian agricultural output? Will there be rising demand for property in a safe, secure, lifestyle city in an independent sovereign nation? And will there be rising demand for the west’s resources and energy reserves?
The answer to each of these questions is of course “yes” and it has been “yes” for a generation. The cultural truth about Western Australia is that it is a thinly populated land mass with a narrow economic base delivering something of a frontier community that will continue to be buffeted by bigger forces emanating from the eastern seaboard or from Asia. Such buffeting might shake but it cannot deny the intrinsic value of what it is that the west has to offer. What this means is that investment and development in the west is most efficiently structured around the economic cycles and rhythms that drive this state.
There is a time to lance and there is a time to parry when dealing with frontier communities. Now is a time to forge ahead confident in the knowledge that the west will remain a place and a people much in demand for generations to come.