Confidence slides as costs continue to mount

CCIWA Chief Economist

Aaron Morey

Confidence has declined further among WA businesses, continuing a two-year slide since the post-pandemic peak of June 2021. Concern about soaring costs rose 4 points in the latest CCIWA Business Confidence Survey, now cited by four in every five respondents (79%) as the top worry among businesses in our State. The spectre of weak demand – WA’s leading barrier to businesses pre-COVID – also crept back, mentioned by one in every four businesses (26%), an increase of 9 points.

Businesses in the retail sector are particularly concerned with falling demand. The rising cost of doing business especially concerns our resources (100%), construction (88%) and manufacturing (87%) sectors.

Among professional services businesses, optimism has collapsed by 45 points. One in three businesses in this sector (35%) now expect the economy to improve in the short term, in line with sectors like construction (34%), resources (33%) and manufacturing (33%). Looking to the next 12 months, one in six WA businesses (16%) anticipate the economy improving. Nearly triple that proportion (43%) expect the economy to weaken instead.

As interest rates rise, one in ten WA businesses say their repayments now equal (8%) or exceed (6%) their turnover, placing them at risk. One quarter of businesses are at risk in the administration and support services (25%), education and training (25%) and food services (22%) sectors.

WA businesses are seeking to adapt to the latest conditions. Costs have forced three in every four (74%) respondents to raise their prices. With an average of six vacant positions in a WA business, three in five (56%) are boosting base wages, or providing one-off rewards such as retention bonuses (20%). In the construction sector, two in every five businesses (41%) are declining offers for new work, with one in five businesses across the economy turning down work (20%). Around half are improving their digital presence (52%) or adopting new technology (46%) such as artificial intelligence.

Though conditions are less severe than in other economies, policy action is needed to address a wicked brew of soaring costs, workforce shortages, lower demand and weaker profitability in WA. WA’s tax on jobs places a particular burden on medium-sized and family businesses, the very businesses we hope will grow into WA’s sectors of the future. WA needs to act now to shed its mantle as the highest payroll tax jurisdiction for SMEs in the country.

Media contact: Thomas Adolph 0427 876 846

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