Western Australia's economy is facing growing pressure from rising costs linked to the ongoing conflict in the Middle East, according to a more cautious half-year outlook released by the state's leading business lobby group.
CCIWA cuts economic forecasts
The Chamber of Commerce and Industry WA has downgraded its economic projections for the next financial year, citing higher prices for oil, gas, freight, and fertiliser that are weighing on consumer confidence and business investment. The new forecasts in its bi-annual outlook align with figures from the WA Budget released two weeks ago, though CCIWA has taken a more bearish stance in several areas.
The group now expects the WA economy to grow by just 2 per cent in 2026-27, compared to the Budget's forecast of 2.25 per cent. It is also more pessimistic on household consumption growth, predicting 1.9 per cent versus the Budget's 2.75 per cent, and dwelling investment, forecasting 1.5 per cent compared to 5.25 per cent. However, CCIWA's forecast of 2.8 per cent growth in business investment is more optimistic than the Budget's projection of just 1 per cent.
Uncertain global environment
With the United States again touting an imminent peace deal in the Middle East, CCIWA chief economist Daniel Kiely qualified the forecasts by emphasising that conditions could shift rapidly. "The current global environment is highly uncertain, with rapidly evolving geopolitical developments creating significant volatility across economic conditions," Dr Kiely said. "As a result, forecasts are subject to a higher degree of variability, and outcomes may shift quickly as new information emerges or risks materialise."
The latest forecasts are generally lower than those in the previous outlook released in September, when the organisation had tipped economic growth of 3.25 per cent for 2026-27 and household consumption of 2.75 per cent.
Impact on businesses and consumers
"WA's economy is resilient, but it will be tested," Dr Kiely said in the latest outlook. "The biggest factor at play for WA is the impact the conflict is having on costs, which have flowed through to the whole economy since the war began. The longer this conflict drags on, the deeper the impact on all economies, and the more difficult it will become to predict what might happen."
The CCIWA's views reflect an intensifying ordeal for manufacturing and services companies worldwide, with manufacturing gauges weakening and central banks under pressure to raise interest rates more quickly and by larger-than-expected margins. "The uncertainty at the moment makes it a tough environment for businesses to invest, grow and expand," Dr Kiely added. "This is particularly true for energy-intensive industries and those impacted directly by the closure of the Strait of Hormuz, like road freight and agriculture. We've also seen a very dramatic decline in consumer confidence, with many households reining in their spending as a result of soaring fuel prices and other cost increases."
