For the full picture, download the report: Australian Markets Weekly 18 March 2019

• The state economy has seen some large fluctuations this decade, first from the boom, then, in recent years, the subsequent winding down in activity as major resource projects were completed. As the resources sector cooled, alongside commodity prices, a renewed focus on cost control ensued after the earlier heady days.
• For over a year now though, the resources sector has been spending money again.  There has been a pick-up in operational expenditure to maintain production guidance. Further, the major iron ore producers also now working to bring on line new mines to replace aging assets in coming years.
• A recent trip across to the West to speak with clients confirmed that with the increase in resource sector activity, large “yellow toys” are now fully employed and busy. Contacts did point to labour shortages in some professions but are not rushing to pay “overs”; rather managing their costs and businesses through training and sequencing work. Resource exports are continuing to run at a high level, close to, if not at, peak capacity levels.
• Meanwhile the domestic side of the WA still looks bruised. Residential markets have seen still very low levels of new dwelling sales and very subdued levels of related development and construction activity. Prices in some suburbs did show an element of revival in 2017/18 as resources activity revived, but prices have failed to kick on. Though last year Perth prices fell as they did across in the East.
• The residential rental market is closer to being in balance, rentals and prices now “cheap” relative to other State/Territory capitals, but may well remain that way until demographics turn and lift the underlying demand for housing.
• Until business momentum can build and then coalesce with a return of improving demographics form a virtuous circle for the WA economy, growth is likely to languish overall.
• Australian data last week was marked by confirmation in the NAB Survey that Business Conditions are continuing to slow through February. The market is now fully discounting a RBA cut by September. This week’s key market moving events include the RBA Minutes tomorrow and Thursday’s February Labour Force report where we look for a steady unemployment rate of 5.0% but no headline growth in employment after last month’s 39.1K outsized gain. Sample rotation factors are also a headwind this month.

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