Perth property slump: No remedy for WA's economic pain as housing construction slows

In some of the most pessimistic analysis of the WA economy, the bank’s assistant governor Christopher Kent effectively warned residents to expect more pain that will spread to most parts of the State.

Dr Kent, in an address about the differing economic conditions facing the country, revealed that Perth had been left exposed by a run-up in housing construction just as population growth was starting to slow.

It meant that instead of building houses or units for two or three people, WA was building new homes for single residents.

House prices and rents were falling and would continue to fall.

“It also suggests that dwelling construction and construction employment are likely to remain subdued for some time,” Dr Kent said.

“That is having a knock-on effect to other industries linked to the property market.”

Some of those knock-on effects are most noticeable in the jobs market, with full-time employment falling for a record 22 consecutive months.

Dr Kent said the fall in jobs this year was evidence of a further drop in economic activity across the State linked to the housing sector.

That is feeding into workers’ wages, which are growing at their slowest rate on record. Mining wages have increased by just one per cent over the past year.

Where WA once led the nation in terms of wages, the Reserve Bank now believes the State’s wages will head back to levels more aligned with the rest of the country.

Rounding off the bank’s negative views, Dr Kent said a recent increase in commodity prices was unlikely to provide a huge boost to the State economy.

“The improved outlook for commodity prices is not likely to lead to a noticeable pick-up in mining investment,” he said.

This week, WA Treasurer Mike Nahan revealed he expected to issue an improved outlook for employment in the coming Budget update, saying there were some economic green shoots emerging.