Costs hitting regional businesses hard

Rising costs are savaging WA’s regional businesses — and both profit expectations and long-term confidence are declining.

The latest CCIWA Regional Pulse Report shows concern about rising costs surged 19 points in the past six months, with four in every five regional businesses (79 per cent) affected.

In particular, labour costs rose for four in every five respondents (80 per cent). The situation is especially acute in the Great Southern, South West and Goldfields-Esperance.

As a result, more than half of regional respondents (54 per cent) experienced a fall in profits, while the share reporting stronger margins (13 per cent) has halved in the past six months. This confirms that small, medium and regional businesses in WA are being stretched to their limits by rising costs, including continued demands for higher wages.

The long-term optimism of regional businesses has also fallen back behind those in the city. One in four (25 per cent) regional businesses expressed confidence in the WA economy over the next 12 months, compared with nearly one in three (30 per cent) in the city. This outlook is 14 points weaker since last quarter, when two in five (39 per cent) regional businesses expressed confidence in the WA economy.

Constraints on the global supply of wheat caused by Russia’s invasion of Ukraine, and the persistent strength of the resources sector, have kept short-term confidence firm, particularly in the Wheatbelt (60 per cent), the Pilbara (69 per cent) and Goldfields-Esperance (67 per cent) regions.

WA’s businesses and regions therefore face a dual challenge; managing rising cost pressures while operating under-strength, given that four in five (81 per cent) respondents continued to cite workforce shortages.

Worker shortages in regional WA

All up, four out of five (83 per cent) regional businesses identified they’re struggling to fill a skilled occupation, including all respondents in the Pilbara.

Other regions with a relatively higher proportion of businesses facing skills pressures include the Kimberley, Great Southern and Goldfields-Esperance regions (86 per cent).

  • The most common response identified is to invest in training new employees (69 per cent), with those in the South West (77 per cent) most likely to be upskilling new starters. At the same time, 11 per cent of businesses are providing sign-on bonuses or other incentives to new employees.
  • Nearly seven out of 10 businesses (69 per cent) are boosting their existing employees’ wage, including four out of five (83 per cent) in both the Great Southern and Goldfields-Esperance regions. One-fifth (22 per cent) of businesses in the regions are providing one-off financial rewards such as retention bonuses to existing employees.
  • Two-thirds (67 per cent) are upskilling existing employees. Businesses in the Wheatbelt (86 per cent), South West (85 per cent) and Pilbara (77 per cent) are most likely to be ramping up their training efforts.
  • One-third (34 per cent) identified that they are turning down offers for new work (e.g. tenders) — down 3 percentage points since last quarter. Those in the Goldfields-Esperance (67 per cent) and the Kimberley (50 per cent) are most likely to be turning down new projects and work.

READ MORE: Read the full Regional Pulse report.

CCIWA encourages the State and Federal Governments to improve conditions for doing business, through relief from payroll tax, eased access to critical skills, and continued support for employers with the cost of training workers.

For more economic analysis see CCIWA’s Economic Insight page.

For general employee advice and guidance, contact CCIWA’s Employee Relations Advice Centre on (08) 9365 7660 or email [email protected].

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