CCIWA Chief Economist
Increased cost pressures and persistent skills shortages have dampened WA’s festive spirit. CCIWA’s final Business Confidence Survey for 2022 shows business sentiment has receded to its lowest level since the beginning of the COVID pandemic.
In the short term, one third (33%) of WA businesses expect weaker economic conditions. Looking ahead to 2023, more than two in five (44%) respondents expect the WA economy to deteriorate, an increase of 4 percentage points.
In total, the confidence of WA businesses in the economy has fallen 29 points since the post-COVID highs of December 2020.
The lowest sentiment was recorded among businesses in health care & social assistance (15%), retail trade (17%) and food services (22%). WA’s professional services sector remains the most optimistic, with 67 per cent expecting stronger conditions. The construction industry (50%) also remains upbeat.
Finding workers remains the biggest impediment to WA businesses. Workforce shortages are cited by nine out of ten businesses in WA’s professional services (92%), resources (89%) and retail (89%) sectors. Four out of five (79%) respondents are struggling to fill a particular skillset. On average, WA businesses are trying to fill 6 vacancies.
In response, three in five (59%) businesses are boosting their employees’ base wages. On average, WA businesses indicated they have increased base wages by just under 11 per cent as part of an annual wage setting process – up 4 percentage points from last quarter and significantly higher than Western Australia’s latest annual Wage Price Index of 3.3 per cent.
These cost pressures, combined with broader inflationary pressures, continue to damage business’ bottom lines. Meanwhile three in five (59%) businesses reported declining profit margins, with CCIWA’s profitability index remaining near record low levels.
Facing risks of global inflation and geopolitical tension, our decision-makers should refocus on policy which encourages economic growth and resilience, in particular by lowering the burden of payroll tax in WA.