Aaron Morey

CCIWA Chief Economist

The short-term confidence of WA businesses has rebounded this quarter, but outlook for the next 12 months remains much weaker than pre-COVID levels amidst uncertainty over border restrictions. This special WA Super-CCIWA Business Confidence Survey focuses on the impacts of WA’s border restrictions on our State’s businesses.

With ongoing uncertainty about the duration of hard border closures, there are now more WA businesses reporting serious impacts due to the restrictions, than there are businesses that report being unaffected.

WA’s hard border has helped protect the WA community, and was the right response while COVID was spreading quickly around the world. At the same time, today’s report highlights the costs.

More WA businesses now report suffering to a ‘moderate’ or ‘great’ extent due to WA’s hard border, edging up two percentage points to 36 per cent since June. Those most severely impacted were in resources (57%), construction (48%), professional services (45%) and retail (38%). A significant majority of businesses operating in north and eastern regions reported moderate or greater impacts from the borders, in the Kimberley (74%), Goldfields (70%) and Pilbara (60%).

Fewer businesses are now untouched by border restrictions. While the proportion of businesses ‘unaffected’ by the borders was 39% in June, it now stands at 33%. Unaffected businesses were most likely to be in sectors with a strong government presence — in healthcare or education.

Today’s report includes case studies of WA businesses outlining the impacts, including:

• The loss of interstate tourists, whose spending is not nearly replaced by a short-term increase in local tourism for businesses like InStyle Adventures Broome.
• The costly cancellations for businesses like the Perth Convention and Exhibition Centre, caused by confusion about when WA will re-join the nation.
• The labour shortages for businesses like BVA Metal Fabrication, with WA too small to sustain many specialist skills alone. Indeed, concerns around skills shortage have surged since June, nearly doubling to 25% of all businesses, and as high as 44% in construction, 39% in health care and 32% of resources businesses.
• The transport delays and supply chain disruptions, impacting our supply of high value, fragile or perishable stock that would otherwise come via air freight, like machine parts for Ranger Exploration Drilling.
• And finally, the growing competitive disadvantage for service-based businesses, whose east-coast competitors can travel to supply services, training and to meet prospective customers and clients face to face.

This is not a choice between a hard border on one hand and unacceptable risk on the other. Western Australia requires a sustainable approach to our borders arrangements, which recognises that record fiscal stimulus cannot last, and that we may be waiting a long time for a vaccine. A world-class contact tracing system would be one of our most valuable economic assets right now, and WA should not eschew the efforts underway in National Cabinet to outline a roadmap to re-join the nation.

Overall confidence

Turning to the overall confidence breakdown, a higher proportion of businesses in professional services (45%), real estate (39%) and retail trade (38%) expect weaker economic conditions in the short term. Positivity was strongest among manufacturers (47%), those likely to benefit from generous new Commonwealth wage subsidies. These led the 18 percentage point decline in negative outlook for the next three months.

Two in five businesses (38%) believe economic conditions in WA will deteriorate in the next year. This is an improvement since the historic low in June, but remains well below the 21% negative outlook recorded in December 2019.

The biggest barrier to business in WA is weak demand, a concern that has risen 18 percentage points since last quarter, impacting two in five (42%) businesses in retail.

WA Super CEO Fabian Ross said the gradual recovery in business sentiment was “encouraging to see, reflecting the steady work of governments to stabilise the economy against the impacts of COVID-19, and the efforts of businesses to adapt”.

“Though some uncertainty remains over the 12-month outlook, Western Australian businesses have advanced quickly and safely through the staged reopening of the economy. WA Super takes a long-term view of investment, to build portfolios for our members that hold their own when markets are down, as well as up. That long-term view puts the pace of WA’s recovery in a positive perspective.”

Read the full WA Super-CCIWA Business Confidence Report