Article by Elisha Newell, courtesy of Business News
02.09.2025
Western Australia’s economy is showing signs of slowing, with weaker exports, easing business investment and a softening labour market pointing to more subdued conditions in the year ahead.
New data released by the Department of Energy and Economic Diversification this week shows the state’s merchandise exports dropped 7.5 per cent to $231.9 billion in 2024-25, driven by a 15 per cent fall in the value of iron ore shipments.
The commodity still accounted for half of WA’s exports, but lower average prices dragged on overall trade performance.
Still, the fall was partly offset by a 22 per cent surge in gold exports, reaching a record $30.4 billion as prices climbed to historical highs.
Private investment also lost momentum. Mining sector capital expenditure increased just 2.4 per cent in 2024-25, compared with 17.6 per cent growth a year earlier.
Meanwhile, non-mining investment grew 6.2 per cent, down from 17.6 per cent the year before.
Adjusted for inflation, overall investment was flat, with the Australian Bureau of Statistics’ survey of future spending pointing to a further 20 per cent decline in 2025-26.
WA’s labour market indicators also reflected this slowdown. Unemployment in the state edged up to 4.2 per cent in July 2025 — the highest level in more than two years — while underutilisation rose to 9.9 per cent.
While employment numbers continued to grow, it was at a slower pace: total hours worked increased faster than headcount growth, signalling employers are stretching existing staff rather than expanding their payrolls.
Despite weaker job market conditions, it seems that wages are holding steady.
The state’s wage price index rose 3.7 per cent in the June quarter, broadly in line with national trends.
Real wages also edged up 0.9 per cent over the year, reversing a decade-long stretch of declines as inflation eased back towards longer-term averages.
Meanwhile, Perth’s annual consumer price inflation was 2.7 per cent in the June quarter, still above the national rate of 2.1 per cent.
Housing costs were the biggest driver, with rents up 7.6 per cent and new dwelling prices climbing 5.5 per cent.
Those statistics were reflected in the latest Cotality home value index, which was up 1.1 per cent in Perth over August, although annual growth slowed to 6.6 per cent.
The state’s population growth also moderated, slowing to 2.4 per cent in the year to December 2024, down from a recent peak of 3.6 per cent.
While still above the national average, weaker net overseas migration and easing interstate inflows have reduced pressure on housing, although median Perth house prices remained 15.6 per cent higher year-on-year at $815,000.
The state budget forecasts predict economic growth will remain modest, with gross state product expanding by just 0.5 per cent in 2024-25 before picking up in subsequent years.
While diversification strategies under the government’s Diversify WA and Future State frameworks are targeting industries such as tourism, international education and defence, the latest economic report notes that productivity growth has lagged and household disposable incomes have not kept pace with headline output.
