From the CEO's Desk

Macro Economics from a Western Australian Context

2025 has already proven to be a year of challenges to global trade arrangements, which will undoubtedly weigh on the world economic outlook. The current US tariff rate imposed on Australia is the lowest at 10%, and given Australia and Western Australia have little direct trade exposure to the US it is expected to have minimal direct impact. However, the tariffs will likely affect Western Australia indirectly, since our major trading partner China is subject to potential above-average tariff rates, with the Chinese authorities already having announced retaliatory measures. However, past experience shows that China counters the impact of economic shocks by stepping up its stimulus measures, which may prove to be an opportunity for our economy.

The longer term consequences of this volatility to global trade relations is unknown. The reindustrialisation of many economies that might occur due to a rise in protectionism and trade fragmentation is a potential opportunity for our resource economy. In addition, the rise in global trade protectionism could be a much-needed spark for local manufacturing, including sectors related to the green energy transition. While the decisions of the new Trump administration have affected household and corporate sentiment, and lifted inflation expectations, it remains to be seen how this will be reflected in actual investment decisions in the US, and consequently, in GDP growth and inflation. However, the probability of a global recession is higher than in late 2024.

Australia and Western Australia are entering the second Trump presidency on a solid footing, with plenty of fiscal and monetary policy space to counter global shocks. Western Australia saw
the strongest Q4 growth in state final demand nationwide, while recording the slowest annual inflation and the lowest unemployment rate. The latest report on state finances confirmed that the Western Australian budget remained in surplus for the first half of the current financial year, while the
level of public debt was lower than estimated in the 2024–25 State Budget.

Strengthening our Distribution Network

At an organisational level, the first quarter of 2025 has proven to be just as busy as the end of 2024, with an array of investor and client-focussed activity to keep our teams busy. In January I travelled with Danielle Lavars, General Manager Funding and Markets, and Davide Caravaglio, Principal Dealer, Funding and Liquidity, to the east-coast of Australia to engage our Domestic Dealer Panel and major bank balance sheet investors. This institutional network is crucial to the pricing and distribution of our funding sources and provides valuable market and demand-related information that informs our long-term borrowing program and funding strategies. Over our three-day engagement we had a packed agenda, meeting with the 12 institutions from our Domestic Dealer Panel, as well as other major investors.

Raising our Profile with New Investors 

March was also filled with investor-related activity, commencing in mid-March with the ANZ Investor Tour, which ran over four days in Wellington and Sydney and continues to attract investors from around the globe. Richard McKenzie, Head of ESG and Investor Relations and Danielle Lavars, attended the last day, which culminated in a panel discussion with other semi-government issuers from across Australia to discuss market trends and sustainable finance. Subsequent one-on-one meetings with international investors following the panel discussion added significant value and provided an opportunity for our team to discuss our borrowing program for the next year, including the issuance of our second green bond. 

Promoting Sustainable Finance and the Western Australian Economy

Since the delivery of our Sustainability Bond Framework (Framework) in 2023 and the release of our subsequent, award-winning first green bond, we have cited the possibility of additional issuances under our Framework. Given investor participation in semi-government issuance over the past six months has increased significantly in Europe and South-East Asia, March was the ideal time to embark on an Investor Roadshow in these regions. Running through the latter half of March, the Roadshow delivered on our strategic intent to engage a suite of potential new investors while supporting our ongoing access to capital markets. WATC representatives split in two teams to cover the key geographical territories and connected with institutions representing a cross-section of the finance sector. We completed a total of 43 investor engagements as a direct result of this activity, meeting with 26 new investors and strengthening relationships with the remaining 17 who have participated in our previous green and benchmark bond syndications.

An Investor Update was prepared in support of the Roadshow, providing information to assist new investors in better understanding the Western Australian economy, the broader Australian context, and our Framework, which guides the issuance of green, social and sustainability bonds. Updated versions of the Framework and the associated Second Party Opinion, provided by global ESG research firm Sustainalytics, have also been published in support of our planned issuance. Additionally, we have added two new projects to the Green Bond Project Pool, which increases unallocated eligible expenditure to $12 billion across 12 projects – 67% of which is future expenditure. To find out more about these projects and our forward view for sustainable finance, go to our First Quarter Newsletter or view our online webinar for more information.

Continuing our Support of Local Government

From a client perspective, the March quarter focussed on Local Government support, with several team members attending the Finance Professionals Conference from 19 – 20 March at Crown Perth. This annual event provides a forum for our team to connect with existing and potential local government clients from across the State, discuss their borrowing and investment requirements, and promote our financial products and services. If you would like more information on how we support Local Government at WATC, get in touch with our team directly or visit our website for more information.

Recognising the Contributions of our People

April will mark the last meeting of Michael Barnes PSM FIPAAWA, as WATC’s Chairperson. Michael assumed the role of Chairperson when he became Acting Under Treasurer in the Department of Treasury in 2014. He was appointed as Under Treasurer in 2015 and has since been the principal economic and financial policy adviser to the Government of Western Australia. During my time at WATC, I have seen first-hand Michael’s tireless work to promote WATC and the State of Western Australia more broadly, to investors and banks around the world, allowing the State to raise the financing it needs to further grow and prosper. His impact has been significant and on a personal level, I am immensely grateful for his support and guidance and wish him every success for the future.

WATC Director Sue Murphy is also retiring from our Board this quarter after six years of dedicated service. Sue was appointed as a Director in January 2019 and over recent years, has worked
to oversee the implementation of key changes within our organisation, including the delivery of new systems, structural changes, and the release of our first green bond. It has been a pleasure to work with Sue and leverage her considerable knowledge. To view her highlights and reflections on her time at WATC, see our First Quarter Newsletter.

Our Commitment to Diversity and Inclusion

March has brought two key events that centre around diversity and inclusion at WATC. First up was the celebration of International Women’s Day on 7 March. I was pleased to gather with WATC leaders and team members from across our organisation to reflect, discuss and act on ways to advance communities towards gender equality. Similarly, our revamped Harmony Week format, which will continue to roll out over April, focusses on team building and continues our important work at an organisational level to embed a culture of partnership, inclusion, and belonging.

Finally, I am pleased to see many new faces across our organisation this quarter, bringing with them diverse backgrounds, unique experiences and interesting new perspectives. Some of our new team members are refilling existing vacancies, while others are supporting planned strategic initiatives to meet the financial needs of the Western Australian government sector, both now and into the future. I welcome them all and look forward to working collaboratively with them to deliver great outcomes for the State of Western Australia.

Wishing you and your families a safe and happy Easter break.