WA goes from boom state to economic laggard

For the past six years, Barrow Island, 50km off the Pilbara coast, has been at the epicentre of the investment boom.

For the past six years, Barrow ­Island, a barren strip of land about 50km off the Pilbara coast, has been at the epicentre of the investment boom that drove Western Australia’s economy to unparalleled heights.

The small island has been home to a construction workforce that peaked at an extraordinary 8400 people, ranking it temporarily as the 14th-largest town by population in the giant state.

The thousands of workers were flown in from all around Australia, and the world, to help build Chevron’s mammoth $US54 billion ($72.6bn) Gorgon liquefied natural gas project — the biggest single investment by any company or government in Australian history.

On Tuesday, Gorgon announced it had finally began producing LNG and condensate on Barrow Island and soon the first shipment will leave bound for energy-hungry Asian markets to our near north.

While WA has benefited handsomely during Gorgon’s long construction period, this week’s milestone on Barrow Island highlights an unavoidable side-effect of the past six years of frenetic ­activity: the Gorgon jobs bonanza is almost over.

The Gorgon workforce that peaked at 8400 has already fallen to 6500, and it will plummet to just 350 people once commissioning of the project’s second and third trains wraps up over the coming year.

While some of the tradespeople, engineers, geologists, cleaners and other workers who made a living on Barrow Island have found other jobs, it’s a fair bet that many have either left WA, are looking for work or are perhaps driving taxis in Perth.

Other big projects in WA, including Gina Rinehart’s $10bn Roy Hill iron ore mine, have also entered production in recent months, leading to further job ­losses.

To make matters worse, most of Perth’s big resources companies have been laying off staff in a bid to cut costs because of the big plunge in commodity prices. Although there has been a sharp bounce in iron ore from a low this year of $US39.30 a tonne to back over $US63 a tonne, the price of ore is still well down on the boom-time levels of $US100-plus a tonne.

Another aggravating factor is the lack of any similar mega-projects being planned in WA that could help fill the gap.

This helps to explain why WA’s unemployment rate has been steadily rising and is now forecast to be above 6 per cent for the next year or more.

Once the undisputed economic champion of the nation, WA is now slipping in all of the key performance rankings, with a sluggish domestic economy, a slower rate of population growth and a weak housing market.

According to Treasury forecasts, economic activity in WA will slow to just 1.5 per in 2015-16 — the lowest growth rate since the recession of 1990-91.

This is mainly due to weaker household consumption and a sharp decline in business investment, which equated to a record 31 per cent of gross state product in 2012-13 but is tipped to fall to just 13 per cent by 2018-19.

Strong increases in WA’s ­export volumes, as recently completed LNG and iron ore projects begin production or expand ­capacity, will offset some of the weakness in the domestic ­economy.

But the next few years are likely to be tough, especially when compared with the once-in-a-lifetime boom of the past decade.

Unfortunately, the Barnett government is unable to ride to the rescue.

While it was able to spend up big on infrastructure projects during the boom and create jobs, the government is pulling back on its own spending due to a mounting debt crisis.