A new survey has found the confidence of Western Australian employers has taken a hit for the first time since the beginning of last year.
A new survey has found the confidence of Western Australian employers has taken a hit for the first time since the beginning of last year.
The latest Commonwealth Bank - CCI Survey of Business Expectations found that although confidence in the WA economy has deteriorated, it remains high.
The June quarter survey has revealed that fewer than half of the 520 survey respondents expect economic conditions in WA to improve over the next year. This is down from a record high of 63 per cent in the previous quarter.
Higher business costs, including higher interest rates and wages have made employers more pessimistic.
As businesses prepare for a return to severe labour shortages, 40 per cent of respondents have been forced to pay higher wages to get the workers they need. Input costs also rose with around half paying more for materials and equipment.
However, most businesses didn't pass the higher costs onto their customers. This has impacted on their bottom lines, with around one third reporting that their profitability took a hit during the quarter.
Despite the fall in confidence, the majority of respondents still believe that general economic conditions are favourable. Around three quarters of employers reported that current economic conditions are good for their business.
The survey also found that labour shortages are already starting to bite with one third of employers finding it harder to get the workers they need.
CCI Chief Economist John Nicolaou said, "How we will find the extra workers our growing economy needs is one of the biggest challenges of our time. New CCI research shows the problem is getting worse, with an extra 488,500 workers needed over the next decade."
Lower confidence and higher business costs have resulted in a greater number of businesses deferring investment plans. Just one in four businesses plan to expand their operations, while a further 20 per cent will cut back on capital spending.
Greg Caust, General Manager Corporate Financial Services WA at the Commonwealth Bank said, "The uncertainty around the proposed Resources Super Profits Tax and the ongoing financial upheaval for some European economies has impacted on business confidence in some sectors. We believe that once the uncertainty surrounding the RSPT is lifted, and the mining sector commits to their expansion plans, other businesses will follow suit."
The feature question of the June survey asked respondents about the impact regulation is having on their business. Respondents were asked about the areas of regulation which have the greatest impact, and the areas which are of greatest concern.
Almost 40 per cent said that Federal taxes are their biggest concern, while more than half rated it in their top three. Small businesses and those in the retail and wholesale trade sectors were most affected.
Industrial Relations was also found to be a major regulatory burden. The Federal Government's new industrial relations regime and changes to the awards system, are causing concern for business. Around one quarter said the changed industrial relations landscape is a problem for them.
The cost of cutting through the regulatory red tape is also a concern for local employers. Respondents were asked to estimate the cost of complying with regulation over the past year. The results show that regulation cost business an average of $250,000 over the past year. There was a large variance, ranging from $1,000 to $5 million, depending on the size of the business.
