Ratings downgrade ignites a west Australian renaissance

The resource-rich state of Western Australia has shrugged off a downgrade by ratings agency Standard and Poor's (S&P) and the so-called end to a decade-long mining investment boom, to once again dominate Australia's economy, according to a study by Commsec released Monday. Commsec's chief economist Craig James told Xinhua that the resource-rich state remained well-ahead of other Australian states. "Western Australia (is) still at the top of the leader board," he said. Despite the mooted conclusion of Australia's investment driven mining boom, WA was once again the leading economy in most economic indicators in the June quarter. "But we are seeing a transition of the growth leadership in Western Australia from the mining sector to the housing sector," James said, indicating the state's continued progress in diversification. The Commsec appraisal will delight state Premier Colin Barnett who has defied the ratings agency after it downgraded Western Australia's triple-A credit rating to AA+ last month "In our view there is likely to be slippage, reflecting our view of limited political will, as evidenced by the early revision of some budget revenue and expenditure measures," the agency said. While some commentators lamented the downgrade, the only apparent consequence - aside from a higher interest rate or bond yield on WA government bonds seems to have been to inspire the state government into ridiculing the decision. The bullish Premier responded by leading Western Australia's strongest ever business delegation into China, including incoming Australia China Business Council (ACBC) state president Adam Handley, and returning with a historic agribusiness deal. The MOU focusing on live export of cattle was signed between WA and Zhejiang the state's sister province in eastern China. "The fact that Zhejiang as a province was able to sign with Western Australia shows there would be some sort of tacit approval from the Chinese national government," Premier Barnett said. "The Chinese government wants to see more meat in China. I am optimistic within six to twelve months we can see that trade underway." While the latest figures from Western Australia's resources industry show that the state experienced its second best financial year performance on record in 2012-13, the strength of the housing sector indicates positive economic transitioning. Craig James said, "We're seeing stronger growth in terms of housing finance and in a number of the state and territory economies, we do have now dwelling starts which are above the longer-term average." An Allianz survey released last month also indicates that the strongest rise in economic optimism emanated from WA. Certainly strength remains in the state resources sector, with reports of its demise well and truly exaggerated according to Mines and Petroleum Minister Bill Marmion. The latest government statistics show that the value of WA's mineral and petroleum industry in 2012-13 was 102 billion Australian dollars - marking the third consecutive year above 100 billion Australian dollars. Marmion said the newly released Department of Mines and Petroleum (DMP) 2012-13 records demonstrated that WA's resources industry remained robust on the back of strong Government support to reduce red and green tape and improve efficiencies. Iron ore has remained the State's highest value commodity, accounting for 56.4 billion Australian dollars or just under 75 percent - of total mineral sales. The petroleum sector increased by 2.9 percent to 24.5 billion with LNG the most valuable product, increasing output by almost 29 percent to a record 19.8 million tons. This includes the recent introduction of WA's first fund exclusively dedicated to the rehabilitation of abandoned mine sites, the Mining Rehabilitation Fund, which has the potential to return more than 1 billion Australian dollars in financial institution-held bonds to companies. "Our State maintained its ranking in the Fraser Institute Survey of Mining Companies during 2012 13, achieving the highest ranking in Australia and the 15th best exploration destination in the world - which is impressive," the minister said. According to economic forecaster Deloitte, mining will continue to dominate the WA economy for decades to come, however the time to transition and diversify is now with gas, agribusiness, international education and tourism the key to WA's economic future. Deloitte's Mike McNulty says the LNG industry is crucial. "For Australia, it's a real coming of age moment as an LNG and gas exporter over the next five years.. I think is a huge opportunity for us going forward."