Regional businesses battered by rising costs, skills shortages

Businesses in regional WA are being battered by rising costs, with more than half reporting a drop in profit margins, according to CCIWA’s Regional Pulse report for the March quarter.

51% of regional businesses reported a drop in their profit margins in the March quarter, while 15% saw profits increase and 34% reported profits were steady.

Business confidence has held firm in regional areas since December, but only one in three (34%) regional businesses expect conditions to improve in the coming quarter, compared with 41% of businesses in Perth.

CCIWA Chief Economist, Aaron Morey, said businesses in the Goldfields-Esperance (45%), Kimberley (44%) and Pilbara (38%) regions were the most optimistic.

“The end of the wet season is usually a cause for an uptick in confidence in the Kimberley as activity starts to return to normal at this time of the year,” he said.

“Optimism is the Goldfields-Esperance and Pilbara regions is likely being driven by strong iron ore prices and record high prices for gold over the past three months.”

Businesses in Peel, the South West and Great Southern were the most pessimistic about the short-term outlook.

Three in four (74%) businesses in regional WA cited rising costs as their biggest barrier to growth in the March quarter, down one percentage point from the December quarter.

Concern about costs were highest in the Mid-West/Gascoyne region (84%), Goldfields-Esperance (82%) and the South West (79%).

Mr Morey said the cost-of-business crisis was biting harder in regional WA than in Perth.

“We’re seeing rising costs consistently ranking as the number one concern for business across WA, both regional and metro, but the numbers are even higher outside the city,” he said.

“The spiralling cost of doing business is just one of the reasons why the State Government must seriously consider payroll tax reform in the upcoming budget.

“Small and medium-sized businesses in our regional communities are being squeezed, so any relief the Government can offer would help to ease that pressure.”

Finding staff remains a challenge for regional businesses, with two in three (66%) reporting the availability of skilled labour as a barrier to growth.

This is down two percentage points on the December quarter, likely driven by the upwards drift of WA’s unemployment rate to 4.2% in January.

The Mid-West and Gascoyne (81%) and Pilbara (75%) were hardest hit by the lack of available skilled labour.

“Skilled trade workers are still the most in demand occupation across WA, followed by machine operators and automotive mechanics,” Mr Morey said.

“We’ve also seen three in four (73%) regional businesses report an increase in the cost of hiring and retaining staff over the quarter, with more than three in five (63%) expecting labour costs to climb again in the next three months.”

The Mid-West Chamber of Commerce and Industry Chief Executive, Joanne Fabling, welcomed the report’s findings.

“The Regional Business Pulse results are in line and a true representation of what the Mid-West CCI feedback is from our members. The long-term skills shortages, and escalating cost of doing business are causing business fatigue and an erosion of confidence,” she said.

“There are both Federal and State Government levers that can be utilised to facilitate an ease in some of these pressures such as approving the Mid-West Gascoyne DAMA business case and payroll tax reform as advocated by CCIWA.”

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