WA business confidence bounces back to a three-year high as labour shortages, operating costs moderate

WA business confidence has bounced back to a three-year high as concerns about labour shortages and rising operating costs moderate. The Chamber of Commerce and Industry WA’s business confidence survey for the March quarter revealed firms were the most optimistic they had been since December 2021, with 41 per cent expecting better economic conditions in the short term. More than a quarter of the 624 businesses surveyed expected conditions to improve over the next 12 months, also the highest since December 2021. The biggest barrier to growth remains the rising operating costs, with 68 per cent of businesses identifying this. But the report, to be released on Tuesday, found the downward trend observed over the past year and a half had continued and remained at its lowest level in three years. CCIWA chief economist Aaron Morey said the overall outlook from WA businesses was optimistic. “The two biggest barriers to business growth in WA have been cost pressures and skills shortages, and these have been persistent for the past few years,” he said. “Both of those concerns remain but have clearly started to ease which is boosting confidence across the economy.” Cost concerns were the most prevalent in the arts and recreation sector, where 91 per cent of businesses reported it as a barrier to growth. It was closely followed by accommodation and food services (90 per cent) and manufacturing (80 per cent). Tabitha McMullan, chief executive of not-for-profit arts organisation FORM Building a State of Creativity, called out rising insurance premiums and staff wages among her biggest concerns. “Creative organisations are very . . . innovative in trying to figure out ways to make their dollars stretch but it definitely challenges sustainability for our programs,” she said. As an example, Ms McMullan said it’s had to decrease staff at its Spinifex Hill Studio art gallery in Port Hedland to combat higher costs. “It means decreased levels of service to artists, visitors and audiences in Hedland,” she said. “We’re very nervous about what the tourism season is looking like . . . with decreased staff numbers up there, it’s quite precarious.” While 62 per cent of businesses were still reporting labour shortages as a significant barrier to growth, that figure was down 5 percentage points since December. “We also saw greater concern about increasing government red tape in the March quarter, with almost a third of respondents identifying it as a barrier to growth,” Mr Morey said, adding it was the healthcare and social assistance, education and training, and agriculture sectors most likely to report this. The survey also asked WA businesses about their reliance on natural gas, finding the 51 per cent relied on gas beyond the use of grid electricity. Businesses reported gas made up around 13 per cent of their total production costs. “Gas underpins so much economic activity in this State and reduced supplies would push up costs for a significant portion of WA businesses, potentially to the point where they become unprofitable,” Mr Morey said. “CCIWA shares the State Government’s vision for more manufacturing in WA. Ensuring affordable and reliable energy will be critical to achieving this vision.” Earlier this month, CCIWA estimated up to 45,000 jobs in WA’s resources sector could be wiped as a result of a looming gas shortage. The Australian Energy Market Operator estimates WA will hit a gas shortfall in 2028 that will worsen in the mid-2030s. Mr Morey said CCIWA continued to urge the Federal Government to expedite Woodside’s North West Shelf expansion to ensure WA’s domestic gas supplies were secured into the future.