Western Australia’s business confidence has faltered, sending a clear signal to the State Government: support small business through tax relief or risk WA jobs.
The latest WA Super–CCI Business Confidence Survey conducted by WA’s peak business body, the Chamber of Commerce and Industry WA (CCI), is the only WA-specific index in the country, providing a snapshot of state-wide economic conditions and business expectations.
CCI Chief Economist Rick Newnham said almost half of WA businesses (47%) are expecting economic conditions to be worse in the next three months, up 15 per cent since the December 2018 quarter, and one in four expect it to be worse over the year (25%), up 9 per cent.
“With confidence faltering, WA businesses are no longer able to continue hiring as they had hoped, with one out of five businesses expecting to reduce their workforce over the next three months, including almost one in three retailers (32%) – WA’s largest employing sector,” Mr Newnham said.
“Small businesses are struggling the most, with 78 per cent expecting their workforce to contract or remain unchanged over the next quarter. This is bad news for the more than 87,000 unemployed and 126,000 underemployed West Australians who want to find work or gain additional hours.”
This weakening confidence in the economy by WA business comes on the back of state-wide polling of more than 800 West Australians, commissioned by CCI, that revealed 73 per cent of West Australians believe the State Government should prioritise reducing its tax on jobs in the upcoming May Budget to help create WA jobs.
“This is supported by a survey of more than 250 WA businesses, with 77 per cent believing that the State Government needs to do more to create new jobs and 82 per cent agreeing that reducing the payroll tax burden should be a priority in the May budget,” Mr Newnham said.
“Despite the mining sector continuing to lead WA’s business confidence, those that expect stronger economic conditions for the year ahead has dropped by 20 per cent since last quarter to 58 per cent.
“CCI’s profitability index has also rung a major alarm bell, with the index sinking below 100.0 for the first time since September 2017 this quarter. More than one in two businesses (55%) tightened their profit margins, with production levels down 15 per cent this quarter compared to the same time last year.
“The number one policy lever the State Government can pull right now to support small business confidence and turn WA’s unemployment rate around, is to cut payroll tax to create small business jobs,” Mr Newnham said.
“WA has the highest payroll tax burden of any state, which means it is more expensive to create a job here than anywhere else in the country. CCI’s 2019-20 Pre-Budget Submission calls for the Government to increase the payroll tax threshold by $100,000 to $950,000 to create almost 900 jobs in the first year alone and boost the State’s economy by $283 million.
WA Super Chief Executive Officer Fabian Ross said although the State Government can be doing more to help smaller businesses, it is also up to the people of WA to rally support for local businesses, especially considering businesses are anticipating tougher conditions in the coming year.
“When business confidence lowers, so does consumer confidence. It can be an unpleasant cycle for all concerned so we need to support small businesses to help turn this around,” Mr Ross said.
To read our WA Super–CCI Business Confidence Survey click here.