The Western Australian Chamber of Commerce and Industry (WACCI) has today released its quarterly Survey of Business Expectations, which revealed that business confidence in the state has slumped to post-GFC lows, with the falling Australian Dollar a mixed blessing. From the Media Release:
Business confidence in the WA economy has fallen further this quarter, to levels not seen since the Global Financial Crisis, according to the latest Westpac – CCI Survey of Business Expectations.
The survey found that 60 per cent of WA businesses expect the local economy to perform poorly over the next 12 months compared to 29 per cent this time last year. Just eight per cent of respondents expect conditions will improve, which is the fewest since March 2009.
Short-term business confidence has also fallen, with the survey finding only six per cent of respondents expect conditions will be ‘good’ next quarter while 42 per cent believe conditions will be poor.
“Sliding confidence levels over an extended period of time have started to flow through into reduced activity across the economy,” CCI Chief Economist John Nicolaou said.
“Businesses are now reporting that the operating environment they face is worse than what they were experiencing during the height of the Global Financial Crisis.”
Three out of the survey’s four indicators of operating conditions deteriorated this quarter. However it was profitability that took the biggest hit, with 48 per cent of respondents reporting that their bottom line had deteriorated, in line with falling sales and rising business costs.
The labour market has also softened in recent times with labour availability increasing to its highest level in a decade. Thirty per cent of businesses said they had cut staff over the September quarter with just 13 per cent adding workers. This trend is expected to continue, with recruitment plans for the final quarter of the year falling to a record low level…
With the majority of WA businesses finding conditions difficult, this quarter’s feature question asked respondents whether the recent decline in the Australian dollar compared to the US dollar had made any difference to their business.
The fall in the Australian dollar has had a negative impact on input costs for 41 per cent of firms. A further 35 per cent of respondents reported that their margins have been negatively impacted by the depreciation of the Australian dollar.
However, a lower Australian dollar is expected to deliver benefits for some businesses, particularly in the manufacturing and resources sectors, and other export focussed industries over the longer term. Some 17 per cent of firms expect to see higher export returns over the coming year as a result of a falling Australian dollar.
The below charts tell the story.
First, Western Australian economic conditions have worsened materially:
As have expected employment conditions:
Whereas labour availability has improved materially:
But expectations of both wage and non-wage costs have rebounded:
Whereas operating conditions have worsen everywhere with the exception of exports:
And firms continue to scale-back their expansion (capex) plans:
You can view the full report here.
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