Speech Summary After the Boom
Address to an Australia-Israel Chamber of Commerce (WA) Corporate Breakfast
The speech starts by noting the significant changes in the national and state economies since the Reserve Bank's Board last met in Perth (in 2011). It notes that these changes were driven by an extraordinary ‘super cycle’ in commodity prices. It posits that the upswing of this triggered massive investment programs in Australia's resources sector, and the subsequent fall in prices was brought about, at least in part, by the resulting increase in Australian production capacity.
The speech then goes on to note that previous resource ‘booms’ have ended up being very disruptive for the national economy. But it contends that such disruption hasn't happened at a national level on this occasion – inflationary pressure was relatively contained on the way up, and the economy has continued to grow on the way down – because the economy adjusted to the shocks. Key to this is said to have been redeployment of capital and labour to sectors where returns looked like they would be higher, and the adjustment of the exchange rate.
The speech then considers the positive legacy of these events, particularly for Western Australia (WA). It highlights that the sheer scale of the investment that has been undertaken makes WA an even more powerful force in some key global commodities markets because of its low cost, high quality and high volume production. And it picks out that on the latest data, WA enjoys the highest per capita income and the highest household net worth of any state (in 2013/14).
The speech concludes by imagining that new opportunities for future growth will likely emerge as a consequence of demand from the middle class of Asia for services, energy and agricultural production. And it highlights that WA's location gives it an advantage in taking on opportunities posed by the growth of India.