CCIWA Chief Economist
The confidence of WA’s regional businesses continues to weaken as they look to 2023. Although economic activity is expected to hold up for the holiday season, the final CCIWA Regional Pulse Report for 2022 shows the two-fold pressure of falling profits and rising costs are expected to persist into 2023.
Expectations of a stronger economy in 2023 have nearly halved in six months. Just 14% of regional businesses report optimism about the year ahead, down from 25% in the June quarter. At the same time, concern grew about a weaker economy, rising by 7 points to 41%. Concern about the economy in 2023 were highest in the Great Southern (71%) and Wheatbelt (50%) regions.
The upcoming holidays remain a bright point, putting the short-term confidence of regional businesses nine points ahead of their metro peers. Two in five (40%) regional businesses feel upbeat about the economy in the next three months, compared to one third (31%) in the city.
Nearly four in five (77%) regional businesses report labour costs like wages have risen, while two thirds (68%) expect they will keep rising in coming months. In regions like the Wheatbelt (88%) and Mid-West/Gascoyne (81%), expectations of higher labour costs exceed those in the city (69%).
Looking ahead to 2023, nearly half of the regional respondents (46%) anticipate falling profits. Just one in ten (10%) regional businesses recorded higher profits this quarter.
The biggest factors dragging down confidence remain our workforce shortages (81%) and rising operating costs (79%), unchanged since last quarter and hitting regional and metro businesses equally hard. General tradespeople are the most in-demand workers in WA regions, along with mechanics and technicians.
Though disruptions to supply chains remain a concern for nearly half our businesses (45%) this has diminished as a concern in recent months.
As WA businesses deal with increased operating costs, and having to pay higher wages, we urge the State Government to reduce the burden of payroll tax, which is the heaviest in Australia. This reform would be all upside, enabling WA to become more competitive, more economically diverse, and more resilient to global headwinds.