The slowdown in consumer spending has continued to weigh on business confidence, reinforcing concerns that Western Australia’s economy has entered the new decade in ‘survival mode’.
Conducted by the state’s peak business body, the WA Super–CCIWA Business Confidence Survey provides the only WA-specific index of the economy and a snapshot of economic conditions and business expectations.
Incoming CCIWA Chief Economist Aaron Morey said that WA businesses ended 2019 with heightened concerns about the economy, downgrading their outlook for the start of 2020.
“Tough operating conditions and low demand have eroded confidence,” said Mr Morey. “Unless this can be turned around low confidence will weigh on Western Australia’s economic recovery, in particular, the prospects for growth in jobs and wages.”
Only about a quarter of WA businesses expect stronger economic conditions in the medium term. It was the weakest three-month outlook in year-ended terms since December 2016.
Weak demand was the most commonly cited barrier weighing on confidence, raised by two in five construction, manufacturing retail and professional services businesses. A key factor is weak consumer spending, reflecting recent CCIWA Consumer Confidence Survey results that nearly two in three (65 per cent) WA households are holding off on making major household purchases in the next three months. For the mining sector, the biggest issue was a shortage of skilled workers.
Low demand weakened business activity, with nearly 7 in 10 (69 per cent) businesses having either unchanged or falling production in the December quarter. Expectations point to a continued decline. Only about one third (37 per cent) of businesses anticipate increasing production levels in the next three months, a decline of 6 percentage points since last quarter. This drove down expectations of future employment growth, with only around one third (32 per cent) of businesses anticipating hiring more staff in the next three months.
The prospect of new construction and mining investment offered some positive signs in the longer term, with almost half of WA mining businesses (48 per cent) planning to increase capital expenditure, investment that will be critical to job-creation and economic growth.
“Coming at the start of a new decade, these results are a timely reminder that governments must continuously engage in meaningful reform to help inject confidence into the business community,” said CCIWA’s Chief Economist.
CCIWA has renewed calls to reform WA’s antiquated shopping restrictions, ensure workers have the skills and incentives to fully participate in the modern economy and to reform taxes and red tape.
WA Super Chief Executive Officer Fabian Ross said: “Along with the decline in consumer confidence, the financial services industry expects that the higher-than-average returns experienced in 2019 are unlikely to be repeated in the coming year. This could make 2020 an even more challenging year for consumers and organisations combined.”