Election 2013 Western Australia March 9

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Project deferrals batter business confidence to GFC lows in December

The Chamber of Commerce and Industry of Western Australia have said long term expectations for West Australian economy have dropped to lowest level since the global financial crisis.


“While business confidence has been falling over the last 12 months, the sharp decline recorded in December follows the recent announcements of major project deferrals in the state,” CCI Chief Economist, John Nicolaou said.
“It’s expected business uncertainty will continue into next year while concerns remain on what the flow-on impacts of project referrals will be on activity outside the resources sector.
Only 13 per cent of WA firms believe the economy will improve over the next 12 months compared to 27 per cent in June. At the same time, WA businesses which expect the economy to deteriorate have increased from 30 per cent in the September quarter to 45 per cent this quarter.
“Local operating conditions have been a major factor for falling WA business confidence. Nearly one third of WA firms reported their sales turnover has declined this quarter,” Mr Nicolaou said.
“More firms reported smaller profit margins (36 per cent) than those that reported an increase (16 per cent), as high costs continued to eat away at margins,” Mr Nicolaou continued.
“While the weaker operating conditions did see labour availability improve slightly this quarter, tight labour market conditions still are a major concern for business in 2013.
This outlook is not surprising given that 43 per cent of businesses reported a high wage bill this quarter.
“Wage pressures and concerns over the strength of the local and global economies remain the biggest concerns for business in 2013,” Mr Nicolaou said.
Wage pressures ranked number one for the third consecutive year, while staff turnover (fourth) and labour availability (sixth) were also priorities.
“Coming into an election year for both State and Federal Governments, it is clear that labour market reforms which address the high cost of doing business and increase the supply of available labour must be a priority.
“WA businesses have also become increasingly concerned about the potential impact of an economic slowdown with domestic conditions rating as the second most important issue for business, with global economic growth coming in third,” Mr Nicolaou concluded.
General Manager of Western Australia for Corporate Financial Services at the Commonwealth Bank, Greg Caust, said that the decline in confidence being witnessed could be attributed to some of the recent market developments affecting the State.
“There has been a lot of debate over the last quarter around Australia’s natural resources and a slowdown in Asia and much of that conversation has been focused on the negative,” said Mr Caust.
“Therefore, the fact that businesses have seen a dent in their confidence and raised their concerns over the outlook for the local economy is largely unsurprising. However, although businesses are holding back on their investment plans we have also seen a slight increase in profitability which is good news.”
“With the expectation of lower sales, firms need to be thinking about how they can continue to push on areas like productivity as we move into 2013 – in this way, they will be in a far stronger position to successfully navigate softer business conditions,” Mr Caust said.


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