Business confidence tips up but costs still key barrier

Western Australian businesses are showing signs of optimism, with the September quarter indicating a slight increase in confidence.

CCIWA’s quarterly Business Confidence Report finds three in 10 businesses (31%) believe conditions will improve in the next three months, an increase of one percentage point from the previous quarter.

Almost one in five (17%) businesses expect the State’s economy to improve over the next 12 months.

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Growth barriers

CCIWA Chief Economist Aaron Morey says while confidence is edging up, most businesses identify rising costs as a barrier to growth.

“Almost four in five businesses (79%) cited rising operating costs as a barrier to growing their business over the coming year – as rising wages, steep insurance costs and tax burdens exert cost pressures on businesses,” he says.

“The retail sector is most concerned, with 94% of businesses saying rising costs will be a handbrake on growth.

“Other sectors showing significant concern about rising costs include resources (93%), transport (90%) and healthcare (90%).”

Concerns about skills shortages eased in the September quarter but it remains the second largest barrier to growth for seven of 10 (71%) businesses, down 13 percentage points from last year.

Also a drag on confidence is weak demand, as 27% of businesses cite – up one percentage point from last quarter.

“Weak demand, driven by cooling consumer sentiment is really the canary in the coal mine for economic growth and gives a powerful indication of the potential challenges facing the WA economy,” Morey says.

Confidence varies between industries

Businesses in the construction industry are leading short-term confidence among WA businesses.

More than two in five (44%) expect stronger economic conditions, up a significant 10 percentage points since last quarter.

“This likely reflects the huge pipeline of residential construction set to be completed, along with the slight easing of labour market conditions,” Morey says.

The resources sector also lifted in short-term confidence, with two in five (43%) showing optimism, up 10 percentage points since last quarter.

Morey says this is in line with strong prices for some commodities, but challenges remain for the resources industry.

“It remains to be seen what impact the Federal Government’s proposed workplace reforms will have on business confidence in the resources industry,” he says.

“The attack on labour hire firms is likely to have a significant impact on the mining sector, which relies on labour hire for legitimate operational reasons.

“It’s likely those concerns will weigh on businesses when they plan for future growth.”

On the downside, confidence lowest among the retail trade sector and healthcare and social services, with only 7% and 11% respectively expecting improved short-term conditions.

Education and training also report subdued (14%) confidence for the next three months.

Most businesses (68%) said they would like to see a reduction in WA’s payroll tax burden in the next State Budget, while 52% would like to see new measures to attract more workers to WA.

CCIWA’s Economic reports, including Business Confidence, are available exclusively to CCIWA Complete, Advantage and Corporate Members. For more see CCIWA’s Economic Insight page

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