11/09/2013 - 07:05

Business confidence needs boost

11/09/2013 - 07:05


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CCI WA chief economist John Nicolaou.

Business confidence in the Western Australian economy has fallen further this quarter, to levels not seen since the GFC, according to the latest Westpac-CCI Survey of Business Expectations.

The survey found that 60 per cent of WA businesses expect the local economy to perform poorly over the next 12 months, compared to 29 per cent this time last year.

Just 8 per cent of respondents expect conditions will improve, which is the fewest since March 2009.

Short-term business confidence has also fallen, with the survey finding only 6 per cent of respondents expect conditions will be ‘good’ next quarter, while 42 per cent believe conditions will be ‘poor’.

Sliding confidence levels over an extended period of time have started to flow through into reduced activity across the economy.

Businesses are now reporting that the operating environment they face is worse than what they were experiencing during the height of the GFC.

Three out of the survey’s four indicators of operating conditions deteriorated this quarter. However it was profitability that took the biggest hit, with 48 per cent of respondents reporting that their bottom line had deteriorated, in line with falling sales and rising business costs.

The labour market has also softened in recent times, with labour availability increasing to its highest level in a decade. Thirty per cent of businesses said they had cut staff over the September quarter, while just 13 per cent added workers. This trend is expected to continue, with recruitment plans for the final quarter of the year falling to a record low level.

The survey results provide a clear pointer to the newly elected coalition government of the challenging environment faced by business.

The first task of government must be to help restore confidence in the economy after three years of political instability and regulatory overreach. This can be achieved as the government turns its attention to the implementation of its election commitments, to kick-start an economy that is struggling under the constraints of Australia’s high cost-low productivity economy.

With the majority of WA businesses finding conditions difficult, this quarter’s feature question asked respondents whether the recent decline in the Australian dollar compared to the US dollar had made any difference to their business.

The fall in the Australian dollar has had a negative impact on input costs for 41 per cent of firms. A further 35 per cent of respondents reported that their margins had been negatively impacted by the depreciation of the Australian dollar.

However, a lower Australian dollar is expected to deliver benefits for some businesses, particularly in the manufacturing and resources sectors, and other export-focused industries over the longer term.

About 17 per cent of firms expect higher export returns over the coming year as a result of a falling Australian dollar. 


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