05/10/2012 - 12:45

Business sentiment to deteriorate further: CCI

05/10/2012 - 12:45

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Business confidence in Western Australia remains firmly negative in the face of improving conditions and is only set to get worse, according to a survey released today.

More than 30 per cent of respondents to the latest Commonwealth Bank-CCI Survey of Business Expectations are expecting economic conditions to worsen over the next 12 months, while only 20 per cent of businesses expect conditions to improve in the coming year.

A fifth of WA businesses expect the economy to deteriorate over the next three months, the survey said.

CCI chief economist John Nicolaou said, however, that there was a small uptick in the number of businesses experiencing favourable economic conditions, from 15 per cent to 17 per cent.

“This small improvement reflects better trading conditions and turnover which has moved into positive territory for the first time since December of last year,” Mr Nicolaou said.

“The improved operating conditions reflect businesses acting to stop the deterioration in their bottom line by lifting the prices they charge for their products and services.”

The survey showed 56 per cent of businesses paid more for labour over the quarter, up from 39 per cent in the June quarter.

More businesses were looking to hire staff, with 28 per cent reporting an increase in the size of their workforce this quarter.

“This survey was taken prior to the drop in commodity prices and the announced project deferrals in the resources sector,” Mr Nicolaou said.

“It is expected that these events will further deteriorate broader business confidence in the months ahead and may see expansion plans deferred again.”

Commonwealth Bank WA general manager for corporate financial services, Greg Caust, said the reaction was more downbeat than what had been hoped for, but it was not unexpected.

“Businesses are, for the most part, staying cautious on what lies ahead and we’ve already seen a number of companies taking the necessary measures to protect themselves against more difficult trading conditions,” Mr Caust said.

“However, despite this, there are plans for expansion with almost one-third of businesses expecting to increase their workforce over the next quarter and companies also planning for further capital expenditure.”

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