Much of Australia's wealth comes from the plains of Western Australia, and Australia's mining capital outperforms its east coast cousins in a number of key economic indicators.
Commonwealth Bank data released last month shows that Western Sandgropers are hit hardest by the country’s unemployment rate, private sector growth and domestic economic activity; the latter doesn’t even take into account resource exports.
But they definitely export.
WA accounts for two-thirds of Australia's resource exports. Members of the Chamber of Minerals and Energy of WA paid 20 percent of the country's corporate tax bill last year, the chamber said.
Western Australia has more listed companies than any other state or territory, but only 10 percent of Australia's population lives there.
Iron ore constitutes a quarter of the state government's revenue and 88 percent of royalties come from iron ore.
China’s demand for minerals kicked off WA’s golden age. The boom has been given a second wind by the energy transition, which requires rare earth minerals in much greater quantities, University of Western Australia Business School professor Ray da Silva Rosa told NewsWire.
“The price of iron ore, driven by demand from China, has remained at much higher levels than anyone could have predicted,” said Professor da Silva Rosa.
“This boom, which has been going on for decades, is due to three factors specific to Western Australia: firstly, the state's geology offers high concentrations of various metals, so if one or two metals come off the boil, the shortage is likely to be made up for by demand for another metal.”
Over the decades, mining companies have developed ways to extract their resources in very remote locations.
“This is why many (mostly small) mining companies with operations in Africa, Asia and even Europe have their headquarters in Perth,” said Professor da Silva Rosa.
The third fundamental aspect is represented by the high safety standards and technical competence.
“The mining industry is much more technologically sophisticated than many Australians realise,” he said.
“It's not about taking a couple of shovels and digging stuff out of the ground.”
A double bonus for these huge, profitable operations is that the success of the resources sector has left little or no room for onshore processing.
“It's a version of the Dutch disease,” said Professor da Silva Rosa.
“That is, the exclusion of the development of other sectors when one sector is immensely profitable.”
The state could do more to add value, but it lacks the motivation to make this additional, extremely costly investment.
“The problem we have is that all our resources are at full capacity in resource extraction and the profits are so good that it is prohibitive to develop the infrastructure and skills for further processing,” said Professor da Silva Rosa.
CommBank’s latest Quarterly Economic Report, released in June, highlighted that people are choosing to relocate overseas and interstate in Western Australia.
“The strongest state economy in the country continues to be Western Australia, with economic opportunities attracting interstate and overseas migrants to the state,” the report said.
“Western Australian consumers are also seeing the highest level of spending growth in the country.”
Salaries increase 4.2% more than the national average.
“Western Australia is the only state in the country where the private sector contributes more than 50 percent of annual economic growth,” the report says.
But then again, there is a downside. Although cheaper than Melbourne, Sydney and Canberra, WA house prices are rising.
A healthy rental vacancy rate is around 3 percent. Perth's vacancy rate is a paltry 0.4 percent.
Such a tight squeeze means rents are higher than those of the BHP, Rio Tinto and South32 buildings that dominate the Perth skyline.
However, the oligopolies of the big players put the state in a position of strength when it comes to negotiating with China.
Professor da Silva Rosa said BHP, Rio Tinto and FMG had dominant market shares and that Chinese buyers were much more fragmented.
“So while Chinese interests may try very hard to organize themselves into a bloc to counter producers, they find it very difficult to sustain any pressure on producers,” he said.
“This means that much of the value is captured by the producers.”
The lifting of Chinese tariffs on wine and lobster also helped the state's economy.
Rebecca Tomkinson, chief executive of the Chamber of Minerals and Energy of Western Australia, knows the state is a force.
“Western Australia’s role as a strategic part of the global energy future and our position as an economic powerhouse for Australia have not been lost on our trading partners, as demonstrated by recent visits by key international diplomats to Perth,” Ms Tomkinson said.
The Chinese Premier visited Australia in June.
He's toured the country, but his handshake photo with Anthony Albanese in Perth was, of course, in King's Park, with a sweeping view of the imposing BHP, Rio and South32 buildings.
Replacement projects are adding incremental tonnes, as Western Australia's iron ore production is forecast to rise to 893 million tonnes over the next three years.
“Western Australia enjoys a stable economy and the continued economic and social contribution of our resources sector plays a vital role in this,” Ms Tomkinson said.
