Labour shortages have overtaken rising operating costs as the most commonly reported barrier to business growth, according to the latest CCIWA survey.
WA’s long-term business confidence has fallen to its lowest level since the start of the COVID-19 pandemic, according to the latest CCIWA survey.
The chamber interviewed 400 local businesses in February and found that labour shortages, rising costs and interest rate pressures had hit the outlook hardest.
Only 44 per cent of interviewees expected conditions to improve over the next 12 months, down 24 percentage points compared to the December survey.
What’s more, the research was completed before March’s Gulf conflict erupted, so the chamber has warned the results were likely to have worsened since then.
Short-term confidence has also softened, with 43 per cent of businesses expecting stronger conditions in the next three months, down six percentage points from the previous quarter.
CCIWA chief economist Dr Daniel Kiely said the Gulf crisis, compounded by this week's interest rate rise, would weigh further on sentiment.
"WA businesses were struggling with cost pressures before this conflict started, so we're coming into the crisis in an environment where business confidence was already going down," he said.
"We expect confidence to take a further hit as a result of the conflict, driven by the increased cost of fuel, which impacts virtually every business in some way."
Labour shortages have overtaken rising operating costs as the most commonly reported barrier to business growth.
Nearly seven in 10 businesses (69 per cent) identified workforce constraints as their primary challenge, an increase of 19 percentage points since December.
The tightest conditions were reported in construction, where 82 per cent of businesses flagged labour shortages, followed by agriculture, forestry and fishing (81 per cent), resources (76 per cent) and health care and social assistance (67 per cent).
WA’s unemployment rate sits at 3.4 per cent, the lowest in the country, while its annual wage growth of 4.1 per cent is the highest nationally.
Rising operating costs remained a close second among barriers, cited by 68 per cent of businesses — up 16 percentage points since December.
And wages were the single biggest cost pressure, reported by 81 per cent of respondents, followed by insurance costs (55 per cent) and taxes and government charges (40 per cent).
Dr Kiely renewed the chamber’s call for state government action on payroll tax.
"Businesses are being squeezed from every direction, and payroll tax is one area the state government has the power to do something about," he said.
“When you consider payroll tax kicks in at a $1 million annual wages bill, it’s capturing more small and medium-sized businesses than ever thanks to rising labour costs.”
Housing shortages also worsened, with 27 per cent of businesses identifying a lack of available housing as a barrier to growth, up six percentage points from December.
The issue was more pronounced in regional WA, where 42 per cent of businesses reported it as a concern.
Dr Kiely said supply chain disruptions from the Gulf conflict, particularly through the Strait of Hormuz, posed additional risks for sectors reliant on imported goods such as fertilisers and petrochemicals.
The Reserve Bank of Australia initially raised the cash rate from 3.6 per cent to 3.85 per cent in February, marking its first increase since November 2023.
It handed down another increase in March, bringing the cash rate target to 4.1 per cent.
