Rising costs and skills shortages causing business pain in regional WA

Soaring operating costs have been highlighted as the biggest barrier to business growth in regional Western Australia, according to CCIWA’s latest Regional Pulse report.

The report, which delivers a region-by-region breakdown of the quarterly Business Confidence survey, has found four in five (84%) businesses in regional WA have identified rising costs as a major concern, up four percentage points from the June quarter.

That compares with just 75% of businesses who identified rising costs as a barrier to growth in the Perth and Peel regions.

The region most affected by rising operating costs was the Pilbara, with 92% of businesses identifying it as a concern.

86% of businesses in the South-West and Great Southern said costs were a major concern, followed by 83% in the Mid-West/Gascoyne and Goldfields-Esperance, and 82% in the Wheatbelt.

CCIWA Chief Economist, Aaron Morey, said some regional businesses were struggling to cover costs.

“We’re seeing very high levels of concern about operating costs across WA and indeed across Australia, but it’s clear it’s having a far greater impact in the regions,” he said.

“Issues like inflation, interest rates and the cost of fuel are all contributing to tight profit margins for WA businesses.”

Skills shortages continue to plague businesses in regional WA, with more than three in five (65%) businesses highlighting this as a concern, although there is some suggestion skills shortages have eased.

“The proportion of businesses reporting skills shortages as a barrier to growth has dropped by seven percentage points since the June quarter, so that is a positive sign,” Mr Morey said.

“Again, the Pilbara region is experiencing a tighter labour market with 83% of businesses saying it’s a challenge.

“That was followed by 67% in the Mid-West/Gascoyne and Goldfields-Esperance, 66% in the South-West and Great Southern and 59% in the Wheatbelt.”

The employment areas facing the biggest skills shortages in regional WA include mechanics, technicians, engineers, farm staff and childcare workers.

Labour costs have also climbed higher over the September quarter with four in five businesses (83%) in regional WA reporting that their wages bill has increased since June.

“This is because many businesses in regional WA are having to offer more money to attract the workers they need, in many cases from interstate,” Mr Morey said.

“Three out of five (62%) businesses in regional WA reported their profit margins had declined in the September quarter, an increase of nine percentage points since June.”

Despite the challenges, businesses in regional WA were more optimistic about the outlook in September compared with the previous quarter.

32% thought conditions would improve in the short-term, 33% thought conditions would worsen and 35% expected no change.

The Pilbara was the most optimistic, with 58% expecting stronger conditions, followed by the South-West and Great Southern (33%), Mid-West/ Gascoyne and Esperance-Goldfields (26%) and Wheatbelt (23%).

To help relieve pressure on regional employers, CCIWA is calling on the State Government to reduce payroll tax for WA businesses, which face the heaviest payroll tax burden in the country.

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