Media Statements - Business investment research paper released

20/1/06

Treasurer Eric Ripper today released the Department of Treasury and Finance’s latest research paper, titled ‘Business Investment in Western Australia’.

Mr Ripper said the paper provided a valuable insight into one of the most important, but also most volatile, components of the WA economy.

“Business investment not only provides a valuable source of short-term demand that benefits our construction and manufacturing industries, but also puts in place the capital stock which has underpinned our strong export performance,” the Treasurer said.

“Since 2000-01, business investment has increased at an annual average rate of 14.4 per cent primarily on the back of resource related projects.”

The Government is making WA an attractive place to invest in by:

maintaining a highly competitive tax regime as a percentage of GSP;
spending a record $18.2billion on capital works over four years;
establishing the State Infrastructure Strategy to look at WA’s infrastructure needs for the next 20 years;
fast-tracking WA's system of approving major resource projects;
maintaining the State's AAA credit rating; and
tackling skills shortages by delivering 4,000 new apprenticeships and traineeships since February 2005.

The paper examines WA’s business investment cycle since data were first collected by the ABS in 1985-86 and why the resource industry accounts for such a large share of the State’s total investment, when compared with the rest of Australia.

The paper examines potential determinants of business investment in WA and finds the key factors to be the cost of capital of the State’s mining industry, productivity improvements and energy costs.

“The paper shows the historical volatility of business investment and consequently how we cannot make policy by assuming that the current boom will last forever,” Mr Ripper said.

The paper is available at http://www.dtf.wa.gov.au under Treasury publications.

Treasurer's Office: 9222 8788