Western Australian business confidence has taken a hit in the first three months of 2022 amid intensified skills shortages, inflationary pressures and supply chain disruptions, CCIWA’s latest Business Confidence report shows.
Following a lift in the December quarter of 2021, confidence levels have dropped over both the short- and longer-term horizons, with both indices suffering their largest quarterly fall since the initial COVID-19 shock in March 2020.
Skilled labour shortages worsened over the three months to March and are now the highest they have been since we started tracking this measure in March 2021. More than four out of five (82 per cent) businesses said they had struggled to fill a position this quarter — up three points from its previous high in the last quarter.
In response, nearly three out of five (59 per cent) businesses indicated they were boosting existing employees’ base wages — up four percentage points since last quarter.
Supply chain disruptions and inflationary pressures are continuing to feed into higher operating costs, with nearly seven out of ten (68 per cent) businesses experiencing higher material costs over the past three months.
Rising caseloads of Omicron are another key factor dampening sentiment, with nearly one out of four businesses (24 per cent) experiencing lower staff numbers due to COVID-19 measures.
Weaker outlooks
Confidence in both the short-term (three-month) and longer-term (12-month) outlooks has declined materially since the December 2021 quarter.
Thirty-seven per cent of WA businesses believe conditions will improve over the next three months, down a whopping 24 percentage points since last quarter. About one out of four (27 per cent) anticipate weaker conditions. The remaining 36 per cent anticipate no change – up 11 percentage points.
The 12-month outlook has fallen to its lowest point since June 2020 after recovering slightly last quarter. Three out of 10 (29 per cent) businesses expect the WA economy to improve over the year ahead, down 11 percentage points since last quarter.
Two out of five (38 per cent) anticipate no change over the next twelve months, while 35 per cent believe conditions will deteriorate — up 11 percentage points.
Sectoral differences
A full pipeline of housing construction is supporting confidence in the construction sector.
WA’s construction industry is the most confident sector of the economy, although that confidence as dropped sharply: more than one in two (55 per cent) construction businesses anticipate stronger conditions over the next three months — down 16 percentage points since last quarter.
While many construction businesses are facing significant project delays and cost blowouts, underpinned primarily by ongoing supply chain disruptions and rising inflationary pressures, a full pipeline of housing construction is supporting confidence.
READ MORE: Read the full Business Confidence report here.
On the other hand, just under half (46 per cent) of resources businesses expect stronger conditions, down a significant 27 percentage points since the last survey.
It appears ongoing supply chain disruptions, rising input costs and mounting geopolitical tensions with our largest trading partner have taken the heat out of confidence this quarter.
Other sectors with a comparatively higher proportion of businesses expecting conditions to improve include education and training (53 per cent), retail trade (47 per cent) and healthcare (44 per cent).
Barriers to business
The availability of skilled labour persists as the most prevalent barrier facing the WA business community, followed closely by rising operating costs and supply chain disruptions.
Four in five (81 per cent) businesses cited skilled labour shortages as a barrier to growing their business over the coming year — up two percentage points since last quarter.
Concerns about skilled labour shortages were most acute in the resources sector: more than nine out of ten companies (93 per cent) identified skills shortages as a barrier.
Other industries with a relatively higher proportion of businesses identifying skilled labour shortages as a barrier included retail trade (89 per cent), agriculture (84 per cent) and manufacturing (83 per cent).
The second largest barrier was rising operating costs, identified by seven out of ten (69 per cent) WA businesses — up nine points since last quarter. Around the same proportion of businesses (66 per cent) indicated that supply chain disruptions are a barrier to growth.
Concerns around an uncontrolled outbreak of COVID-19 in WA were identified by half (53 per cent) of WA businesses — up 7 percentage points since last quarter — while international trade tensions were cited by 11 per cent.
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].
