We are already witnessing a downturn in global commodity markets as a result of COVID-19. However, provided demand for commodities stabilises and our ports remain open, we can and should continue to trade. The mining industry’s FIFO workforce must be carefully managed in line with health advice, but the travel and social restrictions hampering many service-based industries need not have such a detrimental effect on WA’s level of overall economic activity, given our different sectoral composition.
There is significant turmoil in the oil and gas sector that will have adverse consequences for the energy industry. However, our largest miners have indicated that Chinese demand for iron ore – our largest export commodity – remains stable. Continued stable demand will provide the state with a base level of economic activity (and revenue), allowing us to play to our strengths and underpinning the broader recovery effort.
The agricultural sector is also relatively strong. While the Eastern seaboard has been gripped by the worst drought since European settlement, significantly reducing the national crop in 2018–19, WA experienced one of the largest harvests on record. Extreme floods also severely affected both Queensland and New South Wales – again, WA was spared such significant climatic events. WA, thankfully, also largely avoided the horrific bushfires that ravaged so many communities in the Eastern states. As such, WA has avoided exposure to the significant costs associated with supporting and rebuilding communities, businesses and public infrastructure.
In terms of new opportunities, the states do not possess the capacity to respond on the same scale as the Commonwealth Government’s fiscal stimulus package. However, WA has a range of options and levers available to it to support economic reactivation and build public and private value.
Working through WA’s various instrumentalities (particularly utilities and other commercialised entities), the State Government can form strategic partnerships to assist private businesses to rebuild, support the development of existing and new markets, and deliver public value. WA is unique among Australian states insofar as it has resisted the temptation to privatise a range of government functions and services. The WA Government has developed a series of successful public ventures and partnerships, and could utilise existing and new initiatives to assist with economic recovery.
Importantly, the evaluation, planning and pursuit of these types of opportunities is not new in WA. I have recently written on the Labor government’s successful KeyStart initiative – a state-owned entity delivering affordable housing, supporting the construction sector, and facilitating access to finance in a highly constrained environment, all on a commercially viable basis. In the electricity industry, the Economics and Industry Standing Committee’s recent Microgrids Inquiry observed a series of successful partnerships between the government-owned enterprises, private businesses and research institutions to completely revolutionise the delivery of stationary energy demonstrating the capacity of the public and private sectors to work together to innovate, drive technological change, develop new markets and build public and private value. The Committee recommended that the State Government roll out a commercialisation strategy to leverage the development and delivery capabilities obtained through these partnerships.
The roll-out of microgrid technologies will deliver cost savings for all WA energy consumers, but there are also significant opportunities to pursue export markets. As our regional trading partners recover from COVID-19 and seek to electrify rural communities, WA has unique global competitive advantages and capacity to meet demand for cleaner, more affordable and sustainable energy supply. Building existing strategic partnerships between the public and private sector in the pursuit of these export opportunities could deliver significant public and private value.
Much of WA’s success will depend on maintaining existing trading relationships and developing new markets in Asia. In August 2019, the Economics and Industry Standing Committee commenced an inquiry into WA’s trading relationship with the Republic of India. Early evidence indicated that WA would gain from diversifying its trading relationships beyond its strong existing links to China. The State Government’s Asian Engagement Strategy recognises this and has identified 15 priority markets in the region.
In the inquiry’s final week of evidence, before suspension due to COVID-19, the pandemic’s effects were beginning to ripple throughout Asia. In subsequent weeks, it has become apparent that the virus is having a significant impact across the region. Our neighbours will all be affected, will respond in different ways and can be expected to recover at varying rates, in line with their own governmental and economic capacities. Progress under the Asian Engagement Strategy will be hampered by COVID-19, but it will be necessary to continue to pursue it, in a more targeted and prioritised manner, as our neighbour’s own recovery trajectories become clearer.