Western Australia and the downside of economic booms

Peter McMahon is co-Director of the WA 2020 Project at the Institute for Sustainability and Technology Policy within the School of Sustainability at Murdoch University. The WA 2020 Project aims to fill the policy vacuum that exists in WA in relation to issues of sustainability. In particular, it hopes to build connections between researchers, citizens, social movements, activists and civil society groups to generate understanding and action on threats to sustainable living in WA.

Peter McMahon has written important pieces on the unsustainable nature of the WA economy and community, and the fragility of WA's mining and resources boom. In a number of papers on the website of the WA 2020 project McMahon has contributed an alternative history of WA's economic development and a very different narrative about economic, environmental and social sustainability in WA.

Peter McMahon is a regular contributor to the national online magazine Online Opinion (his articles can be found here). This piece appeared recently and is reproduced with acknowledgments to Online Opinion.

A 'Big' West Australia? by Peter McMahon

The current debate about a “Big Australia” is strongly influenced by the sense that the country has a bright economic future. This economic future has been increasingly determined by the resource-rich states, Queensland and Western Australia, and although these states are leading growth there are major problems threatening this situation. This article looks at the case of WA.

Perth is now the country’s fastest growing city and a debate has begun in WA sparked by claims that the population would double by 2050. Perth itself was projected to grow to two million residents and sprawl over 12,000 sq km (which is almost 50 per cent more than New York with nearly 18 million people).

The Australian Bureau of Statistics report estimates that in response the urban road system must be doubled to 27,000km to accommodate the increased traffic, 1300 new schools must be built and water and energy consumption will double requiring new desalination and energy plants.

The main thing driving this “Big WA”notion has been the resources boom which has made WA a major exporter and generated big money for workers, investors and governments. The general optimism arising from the boom, which has been assiduously boosted by local business, the media and politicians, has propelled the idea that the state is capable of anything.

The underlying realities are very different. The WA boom is in fact based in the unprecedented demand for resources caused by the equally unprecedented Chinese economic boom. China has bought WA steel at top prices and wants WA gas and perhaps WA uranium.

However, the Chinese boom is much more fragile than most people understand. The Chinese economy is unbalanced with an orientation towards exports, and this economic growth has been at the expense of social justice and the environment. The authority of the Communist Party is based on this economic success, and if this fails then political upheaval will likely follow.

Furthermore, the Chinese boom has been underpinned by conducive global conditions, and if these change markedly economic growth could collapse. The ongoing global economic crisis, the fragility of the US economy, the ebb of globalisation and a number of other developments threaten this accommodating world order.

As for the other major WA export earner, agriculture, changing rainfall patterns, salinity, soil acidity and erosion threaten the total amount of arable land, while increasing fuel, fertiliser and chemicals costs is driving farmers into ever greater debt. Last year the average loss for hard-pressed Wheatbelt farmers was half a million dollars.

The real inhibitor to WA growth is the unsustainability of current trends of consumption, based as they are in boom-time conditions. Indeed, WA is arguably the least sustainable community in the world, outside totally crazy places like Dubai. Essentially, there is not enough water, not enough infrastructure and not enough cheap energy to pursue the current high growth strategy for much longer.

Western Australians are world class consumers and waste generators. Of the more than 1,800 gigalitres of water they use most goes to agriculture (40 per cent), then mining (24 per cent) then households. Most household usage is for gardens, with usage for luxury items like dish washers and swimming pools a growing factor.

The problem is that rainfall is declining, at least for the south west where the decrease has been around 25 per cent. Dams are emptying out and Perth has resorted to making fresh water though desalination, a highly energy intensive process. The WA Government is slowly introducing conservation measures for households, but overall the situation is approaching criticality even though consumption has stabilised.

WA is Australia’s greatest producer of waste. In 2002-3, WA per capita waste totalled 1.4 tonnes with around 7,300 tonnes disposed of in 300 landfills each day. The housing boom has been a factor here since most waste comes from building demolition and activity, followed by municipal waste collection and then commercial and industrial activity. Along with the quantity, growing levels of toxicity in the waste is a problem.

Western Australians live in the biggest houses in the world (the average house size has doubled while occupants halved over the last half century). The average house price in WA recently rose to half a million dollars. As for that other major consumer item, WA has the highest vehicle ownership rates (75 per cent) in Australia, and the distance driven has been increasing (to nearly 8,000km per car in 2004).

When estimated in terms of ecological footprint (the amount of land needed to meet each person’s resource requirements) WA unsurprisingly rates very high. In 2001 the ecological footprint was 14.5 hectares, well above the national figure and very high when compared to the global level of 2 hectares.

The upshot of all this is that not only can WA not support the population rise suggested, according to any sense of fairness it shouldn’t. Such an increase would mean the perpetuation of grossly unfair resource distribution on a global scale.

The underlying cause of WA’s development has always been the availability of cheap fossil fuels to power the transport, industry, mining and agriculture that have formed the state economy. It was the combination of steam and the gold mining boom that got WA going in the 1890s, then the internal combustion engine and agriculture that kept it going after that until new transport technologies and the iron ore boom kicked in after the 1960s. Along the way jet engines made WA much closer to the eastern states and the rest of the world, easing the problem of isolation.

Now WA has itself become a major energy supplier, mostly in the form of gas but also uranium. There is currently a big debate about whether WA gas should be going to overseas markets as liquid gas, or kept for local use (right now 15 per cent is set aside for local use). The gas is actually some way offshore (the Gorgon gas field is around 130 km of the north-west coast), ours by virtue of a treaty signed in the 1950s, and a recent report highlighted the security concerns in relation to this. China, already a major buyer of north-west gas, is building a blue water navy and was the focus of recent Defence White Paper on future strategy.

The uranium is inland and reserves - totalling around 193,000 tones or 5 per cent of the global total - will begin to be mined soon, perhaps this year. There has in the past been pressure for WA, with large tracts of geologically stable desert, to accept nuclear waste, and this is likely to happen. WA also has mineral sands, some of which (thorium) can be used as nuclear fuel.

The boom-bust economy that is driving high growth rates in WA has been criticised as a longer term prospect for economic reasons. Jon Sutton, Bankwest managing director, wrote in the West Australian that rather than relying on the resources sector alone, “(w)e need “State building” projects. Instead of squandering this bounty, we need to channel some of the receipts of our next period of growth into big infrastructure projects that benefit the State and create jobs in their own right.”

This comment is particularly apposite as much the state’s infrastructure is old and furthermore must be replaced in order to deal with the impact of global warming. A recent storm that knocked out electricity in nearly a quarter of all homes, brought down much of the telecommunications system and gridlocked the major roads network, all costing the major part of a billion dollars, showed just how vulnerable Perth is to such disruption.

Which brings us to the final reason why the Big WA future can’t happen. Dealing with global warming necessitates increased fossil fuel prices, and as peak oil cuts in prices will also rise because of this. WA is already suffering from major household energy cost rises (with increasing numbers of households unable to pay: 17,000 households were disconnected for non-payment of bills by Alinta Gas last year), and rising fuel costs will hit hard. This includes personal travel in cars, commercial logistics and air travel. Furthermore, mining and agriculture are major energy users of energy and will be heavily affected as both operational and shipping costs go up.

There are signs that the current WA state government is at last making some plans for the future, notably the Directions 2031 initiative, but there are no signs that they see the energy crunch as a real issue. Not only is Big WA unlikely, if the energy crunch hits an unprepared WA we may well see a considerably smaller WA as people abandon a state in real trouble.