PT Singam looks at the growth of Western Australia, Australia’s western gateway to Asia that has evolved from a backwater to an economic powerhouse and writes that it is a good time for foreign investors to seize the opportunities available across a diverse range of sectors in a resurging economy.
As the Cathay Pacific flight from Kuala Lumpur touched down at Perth Airport on September 26, 1976, I feared the plane had landed at some deserted, small town.
But I was wrong. It was the International Airport serving Perth, capital of the sprawling state of Western Australia (WA) and then truly a backwater, isolated from the rest of Australia and most of the world.
As a new migrant, I found a conservative yet mostly laidback and friendly town, where jobs were scarce, shops shut at noon on Saturdays and didn’t open on Sundays, pubs traded for a few hours through what were popularly known as Sunday Sessions, and most petrol stations were shut at the weekend with a rostered handful serving the 1 million-plus population.
The West Australian economy, propped up mainly by mineral and petroleum exports and agriculture, was hit by global events, including the oil crisis of 1974 and domestic politics. West Australians reeled from soaring prices, and high inflation remained a depressing feature into the 1980s.
Today, more than four decades later, mineral and petroleum exports as well as agriculture and tourism have contributed to the rapid growth of the economy. Perth Airport has grown from serving a few thousand passengers to more than 10 million a year.
And Perth, which remained a backwater until about a decade ago, has emerged as one of the world’s most liveable cities. It is blossoming into a vibrant city, cementing its position as Australia’s western gateway to Asia and the rest of the world. Shops, pubs and petrol stations stay open for longer hours through the week, like elsewhere around the world.
The WA population has doubled to more than 2.5 million people, but the figure is only 10 per cent of the national total despite the state taking up most of the western third of the Australian land mass. Incidentally, WA is more than 14 times the size of Cambodia, which has a population of 16 million. About 2 million people are settled in Perth, which lags behind Sydney (5.4 million people), and Melbourne (4.8 million).
The state has experienced its fair share of booms and busts over the decades. In fact, minerals and petroleum remain the main contributors to the WA economy despite declining global demand and a sharp fall in prices in the past four years. In 2016-2017, minerals and petroleum accounted for 90 per cent (A$108.2 billion) of exports, and agriculture, food, fibre, fisheries and forestry were responsible for 7 per cent (A$8.5 billion).
However, as analysts and commentators have noted in recent days, the state has weathered the worst of the downturn and is showing signs of growth for the first time since 2013. Business confidence is improving; investment capital is returning; new projects, including major infrastructure works, are at approval or launch stage; and unemployment is falling with demand for engineers up by 60 per cent, and prospective workers and overseas migrants joining the jobs market queue; consumer spending is increasing; and Perth housing is at its most affordable this century while the rental market is showing signs of recovery.
WA Premier Mark McGowan is excited, saying the developments are “terrific news for all those businesses, in particular small and medium-sized enterprises out there that are not part of the export economy but rely on the confidence of West Australians”.
Apart from getting the economy back on track, creating more opportunities for small business and wooing more tourists to the state, the premier wants the state to diversify the economy to cushion against future downturns.
“I’m a strong supporter of mining, oil and gas, and agriculture, but … Western Australia needs to be more than just those industries because otherwise we are so subject to commodity pricing and also technology driving out blue-collar jobs, in particular out of mining and oil and gas,” he told a Committee for Economic Development of Australia gathering in Perth in December.
Economic activity is likely to broaden into other sectors of the economy as the needs of WA’s export markets change, according to the WA Department of Jobs, Tourism, Science and Innovation.
“In particular, Western Australia’s main trading partner – China – is moving from investment led growth with high demand for resources, to consumption led growth with growing demand for services and high quality agricultural products,” it says.
This recognition of the changing economic landscape and the need for diversification means investors, especially small and medium-sized enterprises, would be welcomed by the state with open arms.
Indeed, it is a good time for investors to seize the opportunities available across a diverse range of sectors in a resurging economy. There are mining services, value-added processing, education, tourism, agriculture and food, cattle and sheep and property development.
An exciting development in the mining of lithium is the move to embrace downstream, value-added processing. This means lithium-ion batteries that power electric cars as well as smartphones and laptops, will be made in WA, creating more jobs and spinning off business opportunities for small and medium enterprises.
In agriculture and food production, WA exports 80 per cent of produce, with China being WA’s largest market accounting for 22 per cent (A$1.9 billion) of the state’s total agriculture exports.
Investors will find WA offers a disease-free environment to produce safe, high-quality food and the supply chain gets better with value-adding and branding for the Asian market.
Walnut and avocado plantations are becoming big business as worldwide demand grows for quality health foods.
The first walnut processing plant — a new industry for the state — has been established in Manjimup, 300km south of Perth. Walnuts, high in Omega-3 oils, are mostly sold within the state. The new plant creates opportunities for walnut plantations to send their supplies for processing.
Avocado farms are changing hands at record prices, with Jasper Farms in the southwest corner of WA being snapped up by a Canadian pension fund for an undisclosed price, believed to be at least A$150 million, in a bidding war against local and Chinese interests.
According to the Australian Financial Review, avocado assets are in high demand as growers report returns have doubled in the space of a few years, demand continues to increase and existing production does not satisfy the domestic market.
Among some of the available WA businesses is a A$1 million Perth-based export business for lobster, beef and jarrah honey. WA produces 60 per cent of Australia’s lobster exports and contributes about A$500 million into the state economy. The export business would involve between five and 10 tonnes of rock lobsters a week, certified jarrah honey and certified chilled meat and frozen offal.
Two vineyards and a winery plus residence are available in the wine regions of Margaret River, 280 kilometres south of Perth, and Swan Valley, 16 kilometres east of Perth in the upper reaches of the Swan River. This is a 45-year-old, fully established business on up to 18 hectares and promises $1.1 million income from cellar door, restaurant, export and contract winemaking. A very well-known wine label already generates export income from China. There also is potential to tap the growing Southeast Asian and Chinese demand for wine and ecotourism.
Many small property development projects are available across Perth and WA for investors wanting to build their own homes and at the same time sell for a profit or acquire a rental investment portfolio. One such project involves a big block of land in an outstanding Perth location, near the Swan and Manning rivers, with access to some of the best schools, universities, golf course and shopping centres.
Perth and WA’s economic prowess is enhanced by a high quality of life blessed by friendly people, warm weather, natural beauty and pristine beaches as well as parks. Another major plus is the time zone, give or take an hour or two, Perth shares with 60 per cent of the world’s population as well as the state’s key economic partners, including China, Japan, South Korea, Indonesia and Singapore.
Perth’s evolution as a major hub for air travel, freight and logistics in the past decade is remarkable. Equally, the redevelopment of Perth Airport to move people and goods efficiently for economic advantage deserves unconditional praise.
For one who thought the plane had landed at the wrong airport in 1976, I am impressed with the economic development of Australia’s western gateway to Asia and the rest of the world.
It would be interesting to learn of the first impressions of a new migrant arriving at Perth Airport in 2050, when WA’s population is expected to be more than 6 million. Perth would be anything but a backwater.