Retirement PlanningWestern Australia's Economy in 2025

Western Australia's economy in 2025 is shifting from a period of rapid expansion—driven by robust local investment, mining sector growth, and favorable export conditions—into a stage of steadier, more moderate growth. If current trends hold, Gross State Product in 2026 is expected to increase by roughly 2.3% to 2.7%. As we analyze Western Australia's economy in 2025, it becomes clear that strategic planning is essential.

  • Western Australia's economy in 2025 is holding up relatively well in 2025, though growth is moderating from earlier highs.
  • In evaluating Western Australia's economy in 2025, the important sectors show resilience despite global challenges.
  • Key strengths remain its resources sector (iron ore, LNG, other minerals), strong labour markets, population growth, and housing demand.
  • Risks include global demand (especially China), commodity price pressures, inflation and interest rate dynamics, and energy supply constraints.
  • For 2026, growth is expected to be more modest but still positive, particularly if key infrastructure projects (notably in energy, gas, and mining) start delivering, and if inflation continues to ease, allowing interest rates to fall.

Economic growth projections

Measure Recent / 2024-25 Forecast 2025-26
Gross State Product (GSP) ~2.25 % for 2024-25 (following a very weak 0.5% in 2023-24) (wairc.wa.gov.au) ~2.5 % in 2025-26 (wairc.wa.gov.au)
State Final Demand / Domestic demand growth Strong in 2023-24 (~5.7%), moderating in 2024-25 to about ~3.75%, then forecast ~2.75 % in 2025-26 (wairc.wa.gov.au)
Household consumption Healthy but easing from very strong levels; forecast to remain positive (~3 %) in 2025-26 (wairc.wa.gov.au)

So, WA is transitioning from a high-growth phase (dominated by strong domestic investment, mining expansions, and export tailwinds) into a phase of more moderate growth. 2026 is likely to see GSP growth of around 2.3-2.7% if current trends continue.

Understanding Western Australia's economy in 2025 requires an assessment of both local and international markets.

A Review of Western Australia's Economy in 2025

Resources sector: mining, iron ore, LNG, other minerals

Iron ore

  • Iron ore export earnings for Australia are forecast to drop from about AU$116 billion in 2024-25 to AU$105 billion in 2025-26, then further to ~AU$97 billion by 2026-27. (Industry.gov.au)
  • Prices are expected to weaken over the outlook period, mainly due to increasing global supply and subdued steel demand, particularly from China. (Industry.gov.au)
  • Seasonal effects also matter: port inventories in China, wet seasons affecting export volumes, demand fluctuations tied to China’s property and construction sectors. (Westpaciq)

LNG / natural gas

  • The Scarborough Energy Project (which includes Pluto Train 2 and modifications to Pluto Train 1) is scheduled to begin first LNG cargoes in the second half of 2026. (Woodside)
  • Pluto Train 2 has a capacity of about 5 million tonnes per annum (mtpa), Scarborough in total ~8 mtpa when fully ramped up, with a portion processed via Pluto Train 1 and the new Train 2. (Woodside)
  • Economic benefits of Scarborough are large: over the development and operating life, it is expected to contribute A$52.8 billion in taxation and royalties, employ ~3,200 at peak construction in WA, and generate GDP and export gains. (Woodside)

Other minerals

  • Lithium export earnings are rising, as demand for battery minerals strengthens. Although some downturns in price have occurred, the forecasts suggest continued growth in volume and earnings in 2025-2027. (Industry.gov.au)
  • Gold also is expected to perform strongly. (Industry.gov.au)

Employment and workforce trends

  • Employment in WA is high and rising: the State’s labour market is described as “historically strong”. Total employment recently ~1.644 million people (Feb 2025) and continuing to grow. (ourstatebudget.wa.gov.au)
  • Unemployment is very low: about 3.6-3.7% in 2023-24 and 2024-25, with forecasts of a slight rise to ~3.75% in 2025-26. (wairc.wa.gov.au)
  • Key insights regarding Western Australia's economy in 2025 include labor market stability and industry adaptations.
  • Participation rate is elevated (close to ~69%), helped by population growth and migration. (wairc.wa.gov.au)
  • Wages growth is moderating: from ~4.2% in 2023-24 to forecast 3.75% in 2024-25, then ~3.5% in 2025-26. (wairc.wa.gov.au)

Workforce Risks & Challenges

  • Skills shortages remain, especially in trades relevant to mining, energy, infrastructure, and regional areas.
  • As LNG and gas projects ramp up (e.g. Scarborough/Pluto Train 2), there will be demand for both specialist construction and operations staff. Local capacity may struggle unless training and migration keep up.

Inflation, interest rates, monetary policy

  • Inflation in WA is forecast to ease. The Consumer Price Index (CPI) growth is expected to drop from high levels (~4-5% in earlier periods) to around 2.75% in 2024-25, and remain in the ballpark of 2.5-2.75% in 2025-26. (wairc.wa.gov.au)
  • Wage growth (via the Wage Price Index, WPI) is easing but still above inflation. Forecast ~3.75% in 2024-25, then ~3.5% in 2025-26. (wairc.wa.gov.au)
  • Interest rates: The Reserve Bank of Australia (RBA) reduced cash rates in mid/late 2025: one cut was to 3.60% in August 2025. (OpenAgent)
  • Further rate cuts are expected through late 2025 and into 2026 if inflation behaves, global pressures moderate, and domestic demand remains stable. However, tightening pressures (via labour costs, energy, or commodity shocks) could delay or temper cuts.
  • As we move forward, tracking Western Australia's economy in 2025 will be crucial for stakeholders.

Property market: Perth and regional

Perth residential property

  • Median house price in Perth is around AU$831,921 (July 2025), up ~6.5% in the past year over all dwelling types. (OpenAgent)
  • Units have seen even stronger growth: about 10.4% annual increase, with median unit price ~AU$615,528. (OpenAgent)
  • In conclusion, Western Australia's economy in 2025 is expected to rely on diversified sectors to foster growth.
  • Houses rose ~6.0% annually; monthly and quarterly growth (recent months) have continued, though supply is tight and affordability is under pressure. (OpenAgent)

Supply, vacancies, and regional markets

  • Vacancy rates have been low; in Perth very tight (sub-1%) in many inner suburbs; that creates rental pressure. (OpenAgent)
  • For housing approvals and completions: approvals are up (WA housing approvals up by ~45%), completions have also risen (~18% in 2024) to highest in ~7 years. (ourstatebudget.wa.gov.au)
  • Regional WA (outside Perth) tends to benefit when resource sector activity is rising, especially in Pilbara, Gascoyne, and Kimberley; but real estate there is more volatile and dependent on specific projects.

Energy sector challenges

  • Gas supply: Domestic gas policy is influencing how much output LNG projects must allocate or ensure for local supply; Scarborough includes domestic infrastructure (~225 TJ/day domestic gas as part of Pluto Train 2) to supply WA markets. (Woodside)
  • Energy costs: There are concerns about electricity network capacity, reliability, and how to integrate renewables cost-effectively, especially in regional or remote mining areas. Upgrades to transmission, distribution networks, and investment in renewables and storage are part of government initiatives (Budget papers). (ourstatebudget.wa.gov.au)
  • For fossil energy / LNG, global competition (other LNG suppliers), carbon policy, shipping costs, and environmental/regulatory scrutiny are increasing risk.

Global economic influences

  • China: Probably the single biggest external factor. Weakness in Chinese property market, subdued domestic demand, trade policy, debt issues all reduce demand for steel; steel demand feeds iron ore demand. WA is heavily exposed via iron ore exports to China. (wairc.wa.gov.au)
  • Trade barriers and geopolitics: U.S. tariff moves, global supply chains under strain, trade policy uncertainty are hurting global growth forecasts, which in turn reduce demand for bulk commodities. (KPMG)
  • Energy transition: While demand for “transition minerals” (lithium, copper, etc.) is rising, renewable policy, carbon regulation, and emissions concerns are increasingly part of investment decisions. Projects may face delays or cost increases from supply chain or regulatory sources.

Government initiatives and fiscal position

  • WA State Budget 2025-26 identifies infrastructure investment (roads, hospitals, electricity networks, renewables etc.), strategic industries, and decarbonisation spending as priorities. (ourstatebudget.wa.gov.au)
  • Housing: state government supporting approvals, pushing to increase completions to relieve supply pressures. (ourstatebudget.wa.gov.au)
  • Financial position: WA has been posting operating surpluses (~AU$2.5 billion in 2024-25) and maintaining relatively strong credit metrics. (ourstatebudget.wa.gov.au)

Risks and downside scenarios

Some of the risks that could drag down the outlook:

  1. Commodity price shocks — Especially iron ore or LNG, if global supply overshoots and demand (especially from China) weakens further.
  2. Inflation surprises — Energy or food price rises, supply chain disruptions, wage-pressure could cause inflation to stay higher, delaying interest rate cuts, hurting consumer spending.
  3. Interest rate volatility — If RBA needs to hold rates higher (or raise again) because of international inflation or domestic overheating, housing and investment could suffer.
  4. Labour / skills constraints — Especially in remote or regional areas, shortages in trades, skilled professionals could slow down project execution, increase costs.
  5. Energy / infrastructure constraints — Delays in networks, grid stability, permitting and environmental approvals could slow down energy and gas project ramp-ups.
  6. Global demand risk — As noted, China slowdown, trade wars, geopolitical shocks could reduce export demand.
  7. Policy/regulatory risk — Environmental regulation, carbon policy, domestic gas policy, Aboriginal land rights, etc., could pose risks to project timelines and costs.

Outlook for 2026: What to expect

  • Growth: Moderate GSP growth probably in the 2-3% range if exports (iron ore, LNG) and domestic demand hold up; possibly slightly lower in a pessimistic scenario.
  • Resources: Scarborough/Pluto Train 2 production will begin in second half of 2026, giving a boost to LNG export volumes and earnings. Iron ore earnings likely to decline in nominal terms (due to price) but volumes may remain stable or decline modestly, so sector profit margins will be under pressure.
  • Labour market: Unemployment may creep up slightly (to ≈3.75-4.0%) but remain low relative to historic averages. Wages will still grow faster than inflation in many areas, yielding some real wage increase, but not as strongly as in peak years.
  • Inflation & interest rates: Inflation should continue to trend down toward the RBA target band (2-3%), but risks remain. If inflation behaves, RBA should gradually ease rates, possibly reaching ~3.10-3.50% cash rate by mid-2026 in baseline scenario.
  • Property market: In Perth, property price growth may slow, but still positive. Units may continue to outperform houses given affordability constraints. Growth in 2026 somewhat more balanced; supply improvements may moderate price escalation. Regional markets tied to resources likely to outperform in some locations but remain volatile.
  • Energy sector: More gas supply coming on stream (Scarborough, etc.) will help with both export and domestic gas markets; renewables investment should increase; however, energy costs and grid constraints still challenges.

Detailed Commentary & Strategic Implications

For investors

  • Resources companies may find margins squeezed where input costs rise (labour, energy, transport), so focusing on efficiency and supply chain security is critical.
  • Projects starting in 2026 (e.g. LNG) present opportunity but also risk — implicit discounting for delays and regulatory cost increases is prudent.

For households

  • Affordability remains a concern: while wage growth will assist, housing price rises, higher energy, and cost of living pressures persist, especially in Perth and remote areas.
  • Interest rate cuts will help but households should expect incremental gains rather than large relief.

For government / policymakers

  • Need to ensure infrastructure keeps pace, particularly energy networks, water, housing supply.
  • Upskilling local workforce and facilitating immigration / migration to fill gaps is important.
  • Maintaining fiscal discipline while investing in strategic sectors (resources, renewable energy, critical minerals) will be key to long-term resilience.

Conclusion

In summary, Western Australia's economy in 2025 is poised for change, requiring adaptive strategies.

Western Australia enters the second half of 2025 from a position of relative strength, but the days of very strong growth are winding down. The turning point will be how well the state weathers softer commodity prices, maintains its labour supply, and manages inflation and interest rates. If Scarborough and other key energy projects deliver on schedule, they can underpin a healthier export base in 2026. However, downside risks — from global demand shocks to domestic cost pressures — are real and should be factored into any forecasts or plans.

References

  1. Government of Western Australia, Economic Outlook 2025 – Minister’s Submission, WAIRC (2025). Available at: https://www.wairc.wa.gov.au/assets/Documents/WageCase/2025/Submissions/Submission-Minister-Attachment-A-Economic-Outlook-2025.pdf
  2. Government of Western Australia, 2025–26 WA State Budget: Economic and Fiscal Outlook (2025). Available at: https://www.ourstatebudget.wa.gov.au/2025-26/budget-papers/bp3/2025-26-wa-state-budget-bp3.pdf
  3. Department of Industry, Science and Resources, Resources and Energy Quarterly – June 2025 (2025). Available at: https://www.industry.gov.au/publications/resources-and-energy-quarterly-june-2025
  4. Woodside Energy, Scarborough Energy Project (2025). Available at: https://www.woodside.com/what-we-do/growth-projects/Scarborough-Energy-Project
  5. Woodside Energy, Scarborough Energy Project Fact Checker (2025). Available at: https://www.woodside.com/media-centre/woodside-energy-fact-checker/scarborough-energy-project
  6. OpenAgent, Perth Property Market Update 2025 (2025). Available at: https://www.openagent.com.au/suburb-profiles/perth-property-market
  7. Chamber of Commerce and Industry WA, Submission to WAIRC on Economic Outlook 2025 (2025). Available at: https://www.wairc.wa.gov.au/assets/Documents/WageCase/2025/Submissions/Submission-Chamber-of-Commerce-and-Industry-WA.pdf
  8. KPMG, Australia Economic Outlook Q2 2025 (2025). Available at: https://assets.kpmg.com/content/dam/kpmgsites/au/pdf/2025/australia-economic-outlook-q2-2025.pdf