Shane Wright, Economics Editor The West Australian June 26, 2014, 12:33 pm
Almost half of WA firms are expecting economic conditions to worsen, a new report has found as the country faces a $14 billion pay cut because of falling iron ore prices.
The latest WA Chamber of Commerce and Industry business expectations survey, released today, shows conditions across the State are weakening quickly despite record mineral exports.
The drop in consumer confidence across the State has now hit business operators with more than a third reporting a fall in sales over the past three months.
Small business and manufacturers are doing it particularly hard with almost one in two going backwards.
Almost 30 per cent of firms surveyed laid off staff during the past three months. Just 16 per cent put on more workers.
The biggest positive for WA businesses is that after years of scrambling to find staff, the slowdown now underway has made it much easier to find suitable people.
WA Chamber of Commerce chief economist John Nicolaou said the survey confirmed the transition facing a State had depended on the resources sector for an extended period.
"While business confidence has been low for some time now, the results this quarter reinforce the challenging environment being faced by businesses as we transition away from resources-led investment," he said.
The survey follows the latest Bureau of Resources and Energy Economics forecasts which point to a slower than expected pick-up in iron ore exports and lower prices.
It believes total resource exports will hit $196 billion this financial year before climbing to $201 billion in 2014-15.
But the forecasts are well down on the bureau's March predictions, lower by $3.1 billion this year and $13.9 billion next financial year.
The bureau believes iron ore will average $105.20 a tonne this year before dropping down to $96.50 a tonne in 2015. In March it was forecasting prices of $109.90 a tonne and $102.80 a tonne respectively.
The Commonwealth Bank has also cut its price forecasts for iron ore, suggesting it will average $98 a tonne in the coming financial year.
Both forecasts are substantially lower than those underpinning the State Budget, suggesting a serious risk Treasurer Mike Nahan will have to come up with even more cuts to keep WA's finances in the black.
