Business is being swamped by rising costs that are hampering industry’s ability to respond to the boom.
RED tape, ‘green’ tape, labour rates, access to finance, industrial relations, and tax are all real issues for business at every level. Yet these burdens, generally referred to as the cost of doing business, seem to get little traction at a political level.
A new survey of Western Australian business by the Chamber of Commerce and Industry WA and WA Business News reveals the scale of the problem and provides powerful ammunition, including hard numbers, for those who want to press the case for unshackling industry.
Take for instance the estimate that staffing costs for WA businesses have risen 36 per cent over five years, with the biggest proportion of that being labour, according to the CCI-WA Business News ‘Cost of Doing Business’ survey.
While the fact that wages have risen significantly over that period may not be a surprise, the fact that the biggest cost to most business has increased by more than one third in such a short time is staggering, especially when most respondents say it comes without productivity gains but with a mountain of additional input and administrative costs.
On average, respondents reported that their costs had increased by one third over the past five years and almost 15 per cent indicated cost increases of more than 50 per cent over the five-year period.
Respondents were also asked whether cost pressures were significant enough to cause them to consider moving their business elsewhere.
Worryingly, 15 per cent of respondents said they had already moved parts of their operations interstate or overseas, or were seriously considering doing so.
About 30 per cent said they had not considered moving, although cost rises were hindering the growth of their business, while 13 per cent noted they would have to close altogether if cost pressures did not ease.
CCI chief executive officer James Pearson believes the survey and report that accompanies it is something of a manifesto that could be used by any political group to argue the case for reform of the regulatory and tax burden on business.
The survey has identified and ranked the issues of most importance to business – starting with wages and other labour costs – while the accompanying report discusses the detail of each problem and the solutions available to solve them.
Apart from wages and other labour costs – such as occupational health and safety, industrial relations and workers’ compensation – other big issues in order of concern were red tape and regulation, input costs, repaying debt and paying interest, state government taxes, property leasing, federal government taxes, and local government rates and charges.
It is a sign of the times, a snapshot of business in a state that has retained a boom-level cost base while post-GFC finance costs combine with an ever-increasing array of taxes and bureaucratic demands. In the middle of all this, the federal Labor government has turned back the clock on industrial relations, a policy which overlays almost all of the previously mentioned issues.
It is not, however, just a quantitative survey of 159 WA businesses dominated by small business and heavily representative of the struggling retail, wholesale and manufacturing sectors; the report contains significant amounts of anecdotal material which puts bland issues like red tape in perspective.
“It will help put them in the shoes of these people (small- to medium-sized enterprises),” Mr Pearson said. “I think it is a powerful manifesto.”
Take, for instance, this comment submitted by a small financial insurance firm: “Fully 40 per cent of my time in the past 12 months has been spent on compliance rather than building and sustaining the business.”
Or what about this from a small manufacturer in Perth: “It has taken three years to get a building licence to start construction of a new facility ... we have paid enormous amounts of interest and land tax to hold the block and have been unable to expand and upgrade our business into new markets critical to our business survival. The opportunity cost to my business is now immeasurable. So much for gearing up for the WA resources boom.”
This anecdotal evidence provided by the report not only gives a human voice to a business issue, it helps direct the reader to the actual problems confronted by those in industry, which are often lumped into bland terms such as ‘red tape’.
“Compliance requirements on registered training organisations are increasing (almost) exponentially. Fees will be dramatically increased on a cost-recovery basis as registration is taken over by the new national authority in July 2011,” states a large business services firm.
This is one of many specific examples of comments respondents have used to underscore their quantitative answers. It brings to life the issue of red tape.
Mr Pearson suggests the terminology around this subject, the use of euphemisms and clichés, may be disguising the actual reality of laws, taxes and regulations and the cost burdens they create.
“I wonder if they passed their use-by date,” Mr Pearson said of terms such as red tape.
Although used extensively in the report to headline the various chapters, these broad terms soon shed their mystique as the combination of anecdotal contributions and CCI’s own findings provide the detail required to understand each of these issues.
Each chapter contains recommendations that reflect the concerns of the respondents and previous work by the chamber and others.
Over three weeks, WA Business News will examine in detail the issues raised in this report and its recommendations before it is released for public consumption. The first of these is on wages and other labour costs: Sustained wages growth not mirrored by productivity increases across most sectors.