23/12/2014 - 14:27

Business outlook on economy bleak: CCI

23/12/2014 - 14:27

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Western Australian businesses are becoming increasingly concerned about the economic outlook over the next 12 months, according to the latest Westpac/Chamber of Commerce and Industry WA report.

Business outlook on economy bleak: CCI
Chamber of Commerce and Industry chief economist John Nicolaou.

Western Australian businesses are becoming increasingly concerned about the economic outlook over the next 12 months, according to the latest Westpac-Chamber of Commerce and Industry report.

The report showed a rise in the number of WA businesses expecting the state economy to deteriorate over the next year by 18 per cent since the last quarter, to 55 per cent.

Short-term expectations fell to their third-ever lowest level, with 38 per cent of businesses expecting poor economic conditions in the first quarter of 2015.

“Only in the depth of the global financial crisis were short-term expectations more downbeat,” CCI said in a statement.

“The slide in confidence this quarter occurred even though businesses have seen some relief from the issues that have been weighing on sentiment in recent times.”

22 per cent of businesses’ wage costs had decreased, while indices of labour scarcity, non-wage costs and input costs hit new lows.

The profitability index also reached its highest level in 18 months, as a result of lower costs and more than 20 per cent of businesses increasing their prices.

Employment activity improved in the quarter, however, a significant number of businesses have been shredding staff.

About 25 per cent of businesses reduced the size of their workforce over the quarter, while only 20 per cent hired more workers.

That being said, that figure is up from 13 per cent last quarter.

CCI chief economist John Nicolaou said the deterioration in confidence meant businesses were still worried about the transition in the local economy.

“The recent falls in commodity prices and continued low levels of consumer sentiment have clearly impacted businesses’ perceptions of the economy in recent months,” Mr Nicolaou said.

“Caution is the order of the day for business as people wait to see whether there is more bad news to come, and what impact it will have on their operations.”

Mr Nicolaou said the budget deficit and payroll tax hikes, as reported yesterday, would do little to inflate business sentiment.

“The payroll tax changes are effectively a tax on jobs and will increase the tax burden for business at exactly the wrong time,” he said.

Meanwhile, wage costs, domestic economic conditions and material costs were ranked as the top three priority issues for businesses for the coming year.

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