Regions savaged by rising costs

CCIWA Chief Economist

Aaron Morey

Rising costs are savaging WA’s regional businesses, with profit expectations and long-term confidence declining.

The latest CCIWA Regional Pulse Report shows concern about rising costs surged 19 points in the past six months, with four in every five regional businesses (79%) affected.  In particular, labour costs rose for four in every five respondents (80%). The situation is especially acute in the Great Southern, South West and Goldfields-Esperance.

As a result, over half of regional respondents (54%) saw their profits decrease, while the share reporting stronger margins (13%) has halved in the past six months. This confirms that small, medium and regional businesses in WA are being stretched to their limits by rising costs, including continued demands for higher wages.

The long-term optimism of regional businesses has also fallen back behind those in the city. One in four (25%) regional businesses expressed confidence in the WA economy over the next 12 months, compared to nearly one in three (30%) in the city. This outlook is 14 points weaker since last quarter, when two in five (39%) regional businesses expressed confidence in the WA economy.

Constraints on the global supply of wheat caused by Russia’s invasion of Ukraine, and the persistent strength of the resources sector, have kept short-term confidence firm, particularly in the Wheatbelt (60%), the Pilbara (69%) and Goldfields-Esperance (67%) regions.

WA’s businesses and regions therefore face a dual challenge; managing rising cost pressures, while operating under-strength – as four in five (81%) respondents continued to cite workforce shortages.

CCIWA encourages the State and Federal Government to improve conditions for doing business, through relief from payroll tax, eased access to critical skills, and continued support for employers with the cost of training workers.

The latest Regional Pulse and other economic insight reports are available to CCIWA members

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