23/09/2009 - 08:46

WA business confidence surges: CCIWA

23/09/2009 - 08:46


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Confidence among Western Australian businesses has bounced back to boom levels, a new survey shows.

Confidence among Western Australian businesses has bounced back to boom levels, a new survey shows.



The announcement is below:



In a further sign that the worst of the economic downturn may be over, confidence among WA businesses has bounced back to levels not seen since prior to the global financial crisis, according to the latest Commonwealth Bank - CCI Survey of Business Expectations.

The September quarter survey, which canvassed the views of nearly 500 firms across a range of business and industry sectors, shows that business expectations for the year ahead for the WA economy have risen to their highest level since June 2007.

Almost half of respondents believe the WA economy will strengthen in the year ahead, up from 14 per cent in June. On the other hand, the proportion of businesses which predict a further deterioration of economic conditions has more than halved over the past quarter.

This contrasts sharply to the views held by business six months earlier. At the start of the year, at the height of the global financial crisis, three quarters of WA businesses were pessimistic about the medium term prospects for the WA economy.

CCI Chief Economist John Nicolaou said "the crisis of confidence that has gripped local business throughout the global financial crisis appears to be over. It is pleasing to see a sense of optimism return to the local economy, with business, big and small, gearing up for the next wave of growth and prosperity."

The surge in business confidence in the September quarter has corresponded with a marked improvement in operating conditions.

While all four indicators of operating conditions improved, the sharpest gain was in relation to profitability. Around 13 per cent of respondents reported that their bottom line had improved during the quarter, up from eight per cent in June.

The optimistic outlook has meant that after several months of inaction, businesses are considering plans for expansion.

The survey's index of anticipated capital spending increased for the second consecutive quarter in September, with one fifth of respondents saying they plan to increase investment over the next 12 months.

Greg Caust, General Manager Corporate Financial Services WA at the Commonwealth Bank said, "it is encouraging that local businesses have not lost sight of their long term goals, and are working to ensure their business stands ready to make the most of the economic recovery."

The renewed willingness by business to invest in the local economy has occurred despite capacity utilisation falling to its lowest level in more than eight years.

However, the improving economic outlook doesn't come without its challenges. There is growing concern in the Western Australian business community that the severe labour shortages that have plagued the State in recent years are likely to return.

While businesses report they are still able to find suitable workers, labour market conditions have tightened during the quarter. One fifth of respondents have described labour to be "scarce", up from 15 per cent in the last quarter.

However, many businesses are still feeling the impacts of the global economic slowdown, with one in four respondents forced to reduce the size of their workforce during the three months to September.

With signs of an economic recovery emerging, cost pressures are beginning to resurface. The survey's measures of wages, non-wage labour costs, and input costs all rebounded during the September quarter.

As a result, many businesses report they will have little choice but to pass these additional costs on to consumers. More than 17 per cent of respondents had to increase prices during the quarter, with a further 20 per cent saying they intend to do so before the end of the year.


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