Western Australian businesses remain optimistic about the state’s economic environment, despite rising input costs and labour shortages, according to the June quarter 2007 Commonwealth Bank – CCI Survey of Business Expectations.
Western Australian businesses remain optimistic about the state’s economic environment, despite rising input costs and labour shortages, according to the June quarter 2007 Commonwealth Bank – CCI Survey of Business Expectations.
Overall economic outlook was upbeat, and nearly all of the survey’s respondents (92 per cent) said current economic conditions were positive for their business, with conditions expected to be similar next quarter.
The longer-term outlook was also strong, with most respondents (about 85 per cent) expecting economic activity to either remain strong or strengthen in the next 12 months, while 10 per cent anticipated a weakening economic environment.
Operating capacity was tight, according to 81 per cent of respondents, and the outlook for investment strong, with 36 per cent of businesses expecting to increase capital spending in the next year.
Despite the buoyant mood, operating conditions weakened slightly during the quarter, compared with March.
Cost pressures rose in the June quarter, including both input and non-wage labour costs (such as staff allowances and non-cash benefits).
Nearly half of businesses (48 per cent) expect increases in non-wage labour costs next quarter, partly driven by labour shortages and the need for attraction and retention strategies.
Input costs were up in the quarter, after two consecutive periods of decline, which affected 62 per cent of respondents, particularly those in manufacturing (78 per cent).
Wage pressures eased slightly, although the majority of businesses reported higher wage costs in the quarter (53 per cent), which were especially acute for large and medium-sized firms and those in the manufacturing and production sectors.
More than 55 per cent of businesses expect a wages hike in the September quarter.
Higher input costs are yet to be translated as higher prices, however, with less than one third of businesses raising prices in the quarter.
But 40 per cent of respondents intend to lift prices in the September quarter, which is likely to create inflationary pressure.
The index of labour availability made its third consecutive fall to a record low in the June quarter.
Over three-quarters of respondents said labour was scarce, with a further 76 per cent expecting continued scarcity in September.
Manufacturers (83 per cent) and medium-sized businesses (85 per cent) were most affected by labour shortages.
The survey’s index of recruitment activity eased slightly from a record high in March, with 35 per cent of respondents hiring additional staff in June and 10 per cent reducing staff levels in the quarter.
However, recruitment activity is expected to lift again in September, according to the 42 per cent of respondents who intend to employ more staff.
Mining, construction, agriculture and utilities companies were among the most active recruiters, with 41 per cent of firms in the production sector hiring most staff.
Labour pressures are being felt across all tiers, including executive levels, according to a June survey by executive search firm EL Consult.
The group’s index showed demand for executive level employees increased by 17 per cent in May, driven by management and IT positions, compared with a national increase of 5 per cent.
Over the past year, executive demand in WA has increased by 53 per cent, compared with 24 per cent for the nation.
EL Consult managing director Grant Montgomery said the current environment was close to a perfect situation for Australian executives, led by conditions in WA.
“Any scepticism over the longevity of this boom has been dispelled. Even if there is a significant decrease in resource prices, the range of projects currently on the drawing boards and being executed will guarantee that the WA economy continues to expand,” he said.
Executive demand has provided a boost to job advertising, although growth in online media (30 per cent) has nearly doubled that of print advertising (16 per cent) since May last year.
“In terms of scope when you are looking for candidates internationally, the internet is the way ahead,” Mr Montgomery said.