Regional confidence slips as labour shortages hit

Optimism among regional businesses has dampened amid ongoing skills and worker shortages that are expected to cost them an average of $120,000 each over the next 12 months.

According to the latest CCIWA Regional Pulse report just one in three regional businesses (34 per cent) expect strong economic conditions to last the next 12 months, down 18 points in just three months. Conversely, expectations of weaker conditions more than doubled, up 17 points to 28 per cent.

Despite this growing pessimism in the longer term outlook, however, confidence in the current state of WA’s economy is still strong. A firm majority (62 per cent) of regional businesses anticipate better conditions in the next three months – more than five times the proportion expecting conditions to worsen (11 per cent). Businesses in the Pilbara (82 per cent) and Mid-West/Gascoyne (64 per cent) are the most optimistic, reflecting ongoing confidence among the miners, and relief among agriculture businesses.

The chief concern for both regional and metro businesses is WA’s chronic shortage of skills and workers. Cost of skill shortages by regionSeven in ten (70 per cent) regional businesses are impacted, most notably those in the Pilbara (88 per cent) and Mid-West/Gascoyne (79 per cent) where there is a heavy reliance on seasonal and skilled workers. Nearly half (49 per cent) of WA’s regional businesses expect to need more staff in the next three months, particularly in the Pilbara (63 per cent) and the Mid West/Gascoyne (57 per cent). These skills shortages are expected to cost $247,000 per business in the Pilbara, and $130,000 in the South West, over the next year.

Read the full report here

The other barriers to growth in WA’s regions are rising operating costs (61 per cent), and the prospect of a COVID outbreak (49 per cent). Pilbara businesses have the highest degree of concern about operating costs (88 per cent), while concern about COVID is higher in the Mid-West/Gascoyne (64 per cent).

Two in five (41 per cent) regional businesses report declining profits this quarter. A higher proportion of businesses expect profits to fall in the next three months, compared to those who expect improvement.

“Overall the results mirror sentiment among metro businesses, where concern about declining iron ore prices, a shortfall of 55,000 workers and supply chain issues drove down confidence by 19 points,” said CCIWA Chief Economist Aaron Morey.

Region by region

Looking more closely at some points from each region, businesses in the Mid-West/Gascoyne are feeling more confident in both their own profits and the 12-month outlook than the State average. A dry spring has had a limited impact on yields for agricultural businesses, while tourism operators in the Gascoyne may be anticipating a busy festive period as holidaymakers continue to spend their money in WA amid ongoing interstate and international travel restrictions.

Businesses in the Great Southern and Wheatbelt are more pessimistic, however. Frosts in the northeast of the Wheatbelt in the recent months have caused a large reduction in crop yield potential, while in the Great Southern, concerns around skilled worker shortages and increased uncertainty around supply chain may have dragged confidence down. Fifteen per cent of businesses in the Great Southern/Wheatbelt also identified international trade tensions as a barrier to growth, which primarily reflects ongoing disputes with our largest trading partner.

Despite their overall higher confidence in the 12-month outlook, 41 per cent of Pilbara businesses are turning down offers for new work, compared with just 24 per cent across the State, as a result of worker shortages. In response, 65 per cent said they were ramping up their training efforts and fully three-quarters (76 per cent) of Pilbara businesses were boosting the wages of their existing employees.

Businesses in the South West region are the most gloomy of all: twice as many (42 per cent) foresee a weaker economic outlook for the next 12 months than a stronger (21 per cent) outlook; and nearly half of all businesses (46 per cent) are expecting lower profits in the next three months.

Finally, businesses in the Perth and Peel regions generally tracked the State averages but were second only to the Pilbara in expecting an increase in labour costs in both the current quarter (77 per cent) and the first quarter of 2021 (67 per cent).

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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