High costs and labour shortages are continuing to challenge businesses in regional Western Australia, despite modest improvements to conditions to start 2025.
CCIWA’s Regional Pulse report for the March quarter found two thirds (68%) of businesses in regional WA reported high costs as a concern, unchanged from the previous survey in December.
More than three in five businesses (62%) identified labour shortages as a key barrier, down eight percentage points from the December quarter.
CCIWA Chief Economist, Aaron Morey, said despite the positive result, cost pressures and labour challenges are still persistent in the regions.
“It is clear high costs are still weighing heavily on regional businesses, with two thirds (68%) of regional businesses identifying it as a barrier to growth, and more than three in five (62%) identifying labour shortages as a challenge,” he said.
“The encouraging news is the concerns about cost pressures in regional WA remains unchanged since last quarter and while still high, is at its lowest level in three years.”
Cost pressures were highest in the Wheatbelt, where 82% of businesses identified it as a barrier, followed by the Mid-West/Gascoyne (73%) and the Kimberly (72%).
Labour shortages were also most acute in the Mid-West/Gascoyne, with 81% of businesses saying it was a challenge.
In regional WA, 36% of businesses reported a lack of housing for workers as a barrier to growth, compared with just 14% of businesses in the Perth metropolitan area.
The cost of labour is also putting pressure on regional businesses with 78% reporting an increase in wages costs in the last three months.
Mr Morey said labour cost pressures meant businesses were paying even more payroll tax.
“Wages costs have gone up across the board, and for many small and family businesses that means a higher payroll tax burden,” he said.
“Some businesses will be liable for payroll tax for the first time, without hiring any additional staff, just because they are paying more for the staff they already have.
“WA has the highest payroll tax in the nation, and we urge the Cook government to seriously consider providing some relief when it hands down its budget later in the year.”
The Esperance Chamber of Commerce and Industry (ECCI) Chief Executive, Jennifer Osbourne, echoed the call for payroll tax relief.
“Last year Esperance businesses bucked the trend. With insolvency rates surging toward pre-pandemic levels across the state, Esperance businesses had the second lowest failure rate in WA,” she said.
“I take the opportunity to both highlight the Esperance business community’s resilience and encourage the state government to join the fight to support small businesses by reducing payroll tax in the upcoming budget”.
Overall, business confidence across regional WA remained steady in the short-term and strengthened over the longer term.
Two in five (40%) regional businesses expect economic conditions to improve in the coming quarter, which is a marginal increase of one percentage point from the previous quarter.
Almost three in 10 (28%) regional businesses expect conditions to improve in the coming 12 months, up three percentage points from last quarter.
Businesses in the Great Southern (56%) Goldfields-Esperance (50%) and Peel (47%) regions are the most optimistic.
“The strong result in the Great Southern likely reflects strong production results from the recent harvest, while the outlook in Goldfields-Esperance is buoyed by elevated gold prices,” Mr Morey said.
Businesses in the South-West were less optimistic about the short-term economic conditions, with only 28% expecting a strong result in the coming quarter, likely driven by the seasonal slow-down in tourism after summer and concerns about potential US tariffs on beef.
“It’s also worth noting a decline in confidence in the Pilbara, which has dropped 16 percentage points to 40%,” Mr Morey said.
“This is likely a reflection of US tariffs on steel and the potential of tariffs on China, as well as concerns over rising union activity in the iron ore sector.
“It is a timely reminder for the Federal Government, which needs to ensure its recent industrial relations reforms do not cause widespread disruption and uncertainty across WA’s mining sector.”
