Bearish CCIWA warns Middle East war testing State’s economy

WA’s economy is being increasingly tested by the rising costs triggered by the war in the Middle East, according to a tougher half-year outlook from the State’s peak business lobby group.

The Chamber of Commerce and Industry WA has slashed its economic expectations for next financial year to reflect the higher oil, gas, freight and fertiliser prices weighing on consumer confidence and business investment.

The new forecasts in its bi-annual outlook mirror State Government figures disclosed in the WA Budget two weeks ago, though the CCIWA has taken a more bearish view in some areas.

It sees the WA economy growing at only 2 per cent in 2026-27, against the Budget forecast of 2.25 per cent, and is more negative on household consumption growth (1.9 per cent versus Budget’s 2.75 per cent) and dwelling investment (1.5 per cent versus 5.25 per cent).

However, its forecast of 2.8 per cent growth in business investment is more optimistic than the Budget’s tip of just 1 per cent.

With the US again trumpeting an imminent peace deal in the Middle East, CCIWA chief economist Daniel Kiely qualified the forecasts by emphasising that conditions could quickly change.

“The current global environment is highly uncertain, with rapidly evolving geopolitical development 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 CCIWA’s new forecasts are generally lower than those in its last outlook in September, with the organisation back then tipping economic growth of 3.25 per cent for the 2026-27 financial year, while tipping household consumption of 2.75 per cent.

“WA’s economy is resilient, but it will be tested,” Dr Kiely said in his 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 reflet an intensifying ordeal for manufacturing and services companies around the world, with manufacturing gauges weakening and central banks under pressure to lift interest rates quicker and by bigger-than-expected hikes.

“The uncertainty at the moment makes it a tough environment for businesses to invest, grow and expand,” Dr Kiely said.

“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.”