Economic Update Webinar and Q&A

Yes. China accounts for over 70% of Australia’s iron ore exports, making diversification challenging. The slowdown in China’s property sector and industrial activity has in the recent past driven iron ore prices down from around $140/tonne in early 2024 to about $100/tonne. While WA’s fiscal buffers provide some protection against revenue volatility, sustained weakness in Chinese infrastructure and property investment could further soften commodity prices. That said, global demand linked to the energy transition offers a partial offset to these risks.

Perth, as WA’s capital, is usually looked at as the benchmark for property prices across the state. Median dwelling values have climbed beyond $800,000, driven by record-low listings and strong migration as well as investment away from Sydney, Melbourne and Brisbane. Homes are selling in just 11 days on average, while rents have grown around 5% annually. Looking ahead, affordability pressures and stabilising interest rates point to a moderation in growth rather than a sharp correction. Investor activity should remain solid but below speculative peaks, suggesting a more gradual, sustained trajectory for the property market.

AI valuations are elevated, but underlying demand for compute power remains strong. Reports of Oracle seeking government support highlight supply chain strain and capital intensity, not necessarily systemic risk, though it signals caution on over-leverage.

Australia faces headwinds from China’s slowdown and US-China trade tensions, but opportunities exist in critical minerals and green energy. For instance, Rio Tinto’s Guinea iron ore project signals diversification, while US firms eye Australia for AI data center investments as part of a $600B global infrastructure push. Policy agility will be key to staying competitive.

Residential construction will remain under pressure from labour shortages and high costs, though demand persists (chronic undersupply further exacerbated by policies such as the 5% first home-buyer scheme etc). Commercial activity may stabilise as interest rates ease, but structural shifts toward logistics and data centers will dominate. 

Despite its sizeable population, Indonesia’s regulatory complexity and infrastructure gaps have likely slowed deeper engagement. The IA-CEPA trade pact and recent summits aim to unlock opportunities in EV supply chains, renewables, and education, but execution has rather lagged. Australia’s 2024–28 Development Partnership Plan prioritises these areas acknowledging that this is still a big untapped potential.

The difference is clear as day and night between the US (risk taker) and Australia (risk averse). The US leads in AI and semiconductor investment, while Australia lags in scale and R&D intensity. The US is pouring hundreds of billions into AI infrastructure, while Australia’s national AI plan focuses on safety and modest investment ($29.9M for an AI Safety Institute). To compete, Australia needs bigger R&D incentives, talent pipelines, and cloud/data infrastructure. For example, NSW and Victoria are vying for US-backed data centers, but restrictive data laws may deter investors.