Long-term business confidence in Western Australia has seen its sharpest decline since the COVID-19 pandemic hit in 2020, with labour shortages and interest rate rises weighing heavily on WA businesses.
CCIWA’s Business Confidence survey of almost 400 WA businesses was conducted in February, before the Gulf conflict erupted, with confidence likely to have fallen even further since that time.
Only around two in five (44%) of WA businesses expected conditions to improve in the next 12 months, a drop of 24 percentage points since December.
Short-term confidence is also down, with just over two in five (43%) expecting stronger conditions in the next three months, down six percentage points from December.
Rising costs emerged as a major barrier to growth for WA businesses in the March quarter, identified by seven in ten (68%) of WA businesses surveyed, up 16 percentage points since December.
CCIWA’s Chief Economist, Dr Daniel Kiely, said a further downturn in confidence was a likely result of the Gulf crisis, which has been compounded by this week’s interest rate hike.
“WA businesses were struggling with cost pressures before this conflict started, so we’re coming into the crisis in an environment where business confidence was already going down,” he said.
“We expect confidence to take a further hit as a result of the conflict, driven by the increased cost of fuel, which impacts virtually every business in some way.
“There are also widespread concerns about potential supply chain issues for sectors like agriculture, which rely on the Strait of Hormuz to transport goods like fertilisers and petrochemicals.
“Aside from those direct impacts, businesses in WA can expect all other inputs to increase in line with inflation.”
Dr Kiely said the prospect of costs for businesses rising even higher made CCIWA’s ongoing call for payroll tax relief more relevant than ever.
“Businesses are being squeezed from every direction, and payroll tax is one area the State Government has the power to do something about,” he said.
“When you consider payroll tax kicks in at a $1 million annual wages bill, it’s capturing more small and medium-sized businesses than ever thanks to rising labour costs.”
Dr Kiely said skills shortages emerged as a major drag on confidence in the first three months of 2026.
“The employment market in WA is extremely tight, with seven in ten (69%) businesses telling us that labour shortages are their number one barrier to growth,” he said.
“We’ve seen labour shortages become most prevalent in the construction sector, where 82% of businesses reported it as a barrier.
“The skills crunch is also hitting agriculture, forestry and fishing (81%), resources (76%) and health care and social assistance services (67%).”
Dr Kiely said skilled migration and better support for apprenticeships, traineeships and other work-based learning played a crucial role in shoring up WA’s workforce for the future.
“Federal incentives for employers who take on apprentices and trainees have been slashed, and we’ve seen an overall decline in the number of people starting apprenticeships and traineeships,” he said.
“It’s vital that both the State and Federal Government make skills training a priority and take a longer-term approach to ensuring there’s a pipeline of workers for WA industries.”
Housing shortages also remain a key barrier to business growth in WA, with almost one in three (27%) businesses identifying it as a barrier – up six percentage points from December.
“Housing supply impacts the attractiveness of WA as a place to work and live and in turn effects business competitiveness,” Dr Kiely said.
