REPEAT: MNI: RBA Coombs: Econ Conditions Of States Converging

Repeats Story Initially Transmitted at 02:29 GMT Oct 10/22:29 EST Oct 9

By Sophia Rodrigues

     SYDNEY (MNI) - Conditions in the state of Western Australia, the area which

saw the largest decline in domestic demand in recent years, are now showing

signs of stabilizing and converging with economic performance in other states,

the Reserve Bank of Australia's deputy head of economic analysis department

Merylin Coombs said Wednesday.

     Coombs was speaking in Broome in Western Australia on the topic, "Economic

Conditions in Australia - Some Implications for the Kimberley."

     Below are the key observations we made from the speech.

     --Coombs' speech centred around the improvement in economic conditions in

Western Australia, which means there is now less variation in the economic

outcomes between different states in Australia. Her comments were mainly based

on the RBA's liaison program which is used in the their assessment of

developments in the Australian economy. Overall, there was an optimistic tone to

the speech with respect to all the three key perspectives she discussed:

business investment, labour markets and housing markets.

     --Coombs' briefly touched on the Australian economy, reiterating the RBA's

forecast for growth to remain a little above 3% for the next year or so, which

will further reduce spare capacity in the economy, and help a gradual increase

in wages growth and inflation. She noted that China's growth has slowed a little

but has held up despite increasing trade tensions with the U.S. Coombs' also

said that commodity prices have been higher than the RBA had expected. The RBA

continues to expect commodity prices to decline during 2019 but not to decline

as far as the lows seen in 2015-16.

     --Coombs' said the combination of higher commodity prices and the need to

sustain capital expenditure has resulted in a pick-up in activity across the

resources sector in Western Australia. She pointed to the announcement of three

large replacement iron ore mines to be built in coming years and also

progression in plans for a couple of large offshore gas projects in the early

2020s, some of which is to maintain production levels. In addition, there are

prospects for future investment in gold and lighter-weight metals and

battery-related minerals due to an improved outlook for the global uptake of

electric vehicles and renewable energy. Coombs' also said there are signs of

pick-up in mineral sector activity in the Kimberley region.

     --Coombs' made a case for strong population growth in the state because

that is important for "material improvement" in housing construction, adding

that prospects for such a pick-up are closely linked to the labour market

outlook.

     --Employment growth has increased in Western Australia since the start of

2017 and the recent increase in job vacancies suggest further growth is to come,

Coombs said. While labour availability remains ample, there are some signs of

tightening for certain skills in mining and related sectors. The RBA is watching

reports of tight labour availability closely, as a steady decline in spare

capacity in the labour market is one of the main factors behind the forecast for

a gradual pick-up in aggregate wages growth and inflation, she said.

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com