Signs are starting to emerge that the Western Australian economy will begin to recover from the global economic slowdown in the next 12 months.

The latest Commonwealth Bank – CCI Survey of Business Expectations, which canvassed the views of more than 570 firms across a range of sectors, has revealed that an increasing number of WA businesses are becoming more confident about the prospects for the local economy.

While the proportion of businesses that believe economic conditions in the State will improve over the next 12 months has doubled, a majority of firms are still of the view that the local economy will weaken in the year ahead.

On the other hand, respondents have once again reported that the current economic conditions in Western Australia are positive for their business, providing further encouragement that the State is well placed to ride out the worst of the global slowdown.

CCI Chief Economist John Nicolaou said “business and the broader community can take heart from the survey results. Improved business confidence and a renewed appetite by firms to expand their operations provide an early signal that an economic recovery is on the horizon.”

The rise in business confidence reflects a stabilization of operating conditions following six months of decline. Both turnover and trading conditions improved during the June quarter, while exports and profitability remained largely unchanged.

The improved outlook for the WA economy has given businesses across the State renewed confidence to pursue or re-consider investment plans for the first time in over a year. Almost one in five respondents say they intend to expand their operations in the year ahead.  

The survey also found that the cost of doing business in WA has continued to fall.

Greg Caust, the Commonwealth Bank’s General Manager Corporate Financial Services WA said, “the improved ability of businesses to recruit quality labour at lower wage levels in the current market is a welcome confidence boost for the WA business community.  Put this together with the major projects we have on the horizon here in WA, investment plans for businesses will start to hit the agenda again.”

The challenging economic conditions have also forced a large number of firms to assess their labour needs. Nearly one-in-three respondents have cut staff over the past three months. In another sign conditions will start to improve in the near term, nearly one-in-four businesses say they plan to hire more staff in the next few months.

With labour market conditions stabilizing, the ability of businesses to attract and retain the workers they need has improved to levels never before seen. Only 15 per cent of businesses described labour as “scarce” in the June quarter, compared to three quarters a year ago.