The WALGA Quarterly Economic Briefing for March is now available. The briefing provides Local Governments with a snapshot of the current economic climate and economic conditions impacting our sector.

The start of 2023 has been punctuated by rising inflation and interest rates which are placing mounting pressure on the cost of living.

Construction costs, a tight labour market and rising wages remain challenging for Local Governments, however there are some positive signs on the horizon.
 

With the cost of living rising at its highest rate in 30 years, Local Governments are setting their budgets for the next financial year at a challenging time for local communities.

While there are early signs inflation is peaking in Australia, it is expected to remain elevated for some time and will remain a focus for policy makers both at home and overseas. The RBA has made clear its commitment to bring inflation back within its target band.

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Local Governments have experienced sharp increases in their cost base, with the Local Government Cost Index accelerating for the past two years.

The spike in construction costs from supply chain constraints, COVID-19 stimulus induced demand, and labour shortages has been the key driver. Some relief can be expected in coming years as supply constraints begin to ease and LGCI is expected to slow through 2022-23.

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Another challenge for the sector will be wages – which are the largest part of the sector’s cost base – and are tipped to increase following several years of modest growth.

Finding staff will also remain a challenge as the labour market remains tight, as job vacancies continue to outnumber unemployed persons and the unemployment rate remains low.

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On track to record below-trend growth of 1% in 2023-24 and 1.75% in 2024-25 as commodity prices are expected to ease, Government stimulus comes to an end, and households rein in spending in response to interest rate rises and the higher cost of living.

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View the March Economic Briefing