Expectations low but investment on a high

ECONOMIC forecasters may be tipping an economic surge in Western Australia, but, in the light of tough trading conditions, employers are yet to buy into it.

The latest Chamber of Commerce and Industry-BankWest Survey of Business Expectations  found that concerns about the effects of drought, the war in Iraq and the weak stock market have contributed to a further fall in business confidence during the March quarter.

Businesses reported that costs were rising, it was harder to recruit new staff and profitability was down. The survey found that the availability of suitable labour had decreased during the past year and that trend was continuing.

CCI chief economist Nicky Cusworth said the survey, conducted in the lead-up to the Iraq war, found that some of the volatility in prices could be linked to the movement in oil prices.

Business confidence in the State’s outlook has fallen 25 per cent in the past year while confidence in the national outlook has dropped 46 per cent.

The difficulty in finding suitable available workers was borne out in figures released this week by forecaster Access Economics that pointed to a jobs and wages boom.

In its five-year business forecast for WA, Access tipped an investment boom with a significant number of potential mining, mineral and chemical manufacturing projects in the State. This financial year it is expected to translate into economic growth of 6.3 per cent, outstripping the rest of the nation.

Figures from the September quarter last year reflect a rebound in engineering construction activity. Nationally, the value of construction activity increased 18.8 per cent seasonally adjusted year-on-year in the September quarter.

WA accounts for around 15 per cent of the engineering work done in Australia.

In 2001-02 the value of construction activity in WA was more than $3 billion.

As with the CCI-BankWest survey, a national survey by D&B Australia & New Zealand found that while expectations for profit and sales remained low, businesses executives were bullish about investment.

D&B Australia & New Zealand CEO Christine Christian said that the survey showed that capital investment expectations rose despite selling prices remaining unchanged and other indicators falling.

“The last eight surveys have shown the strongest capital investment expectations in more than two years, with virtually no executives cutting spending,” she said.

“Although this investment has been helped by low interest rates, the strength of actual and expected capital expenditure is a remarkable expression of confidence in the future.”

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