Staff shortages, supply chain issues likely to drag on

While business has seen unprecedented demand in Western Australia over 2021 despite a raft of hurdles, there is still a way to go to overcome staff shortages, supply chain and logistical issues. But there may be some promise on the horizon.

It has been a challenging year for Australian businesses as much of the nation saw COVID-19 lockdowns drag on.

But for Western Australia’s business community, the challenge was more about keeping up than keeping open, with players small and large hitting overdrive in an effort to prop up the nation’s economy.

Last financial year, WA’s economy grew 5.7 per cent, the highest of any state. WA was the only state to record growth across the last two financial years.

In a global context, WA’s domestic economy enjoyed the second highest growth of any jurisdiction since the pandemic began, beaten only by China.

Much of the State’s growth came thanks to limited exposure to COVID-19 impacts, a rapid labour market recovery, enormous government stimulus packages and the agility of the local business community to react and adapt to fast-changing operating environments.

The State’s mining and resources sector – the beating heart of the nation’s economy – has continued to buoy employment growth and exports, while the agriculture sector also saw strong commodity demand and renewed global interest.

The employment market in the West remains hot with job advertising the highest since the last mining boom. Our relatively unaffected State now has a nation-best unemployment rate hovering below 4 per cent – the lowest in 12 years.

But after 20 months of red lining, can WA keep up the pace?

Influencing factors that small, medium and big business will navigate in 2022 include ongoing worker shortages, rising operational costs, supply chain issues and international tensions among others.

People power

In late October, the Chamber of Commerce and Industry WA published its Business Confidence Survey report, which identified a shortfall of 55,000 workers that would cost our State $1.5 billion over the next year.

Seventy per cent of businesses identified they were struggling to fill skilled worker vacancies. The impact is widespread – from food and accommodation businesses, the resources sector, construction, manufacturers and professional services.

Among the workers in highest demand are mechanical fitters – critical to the resources and manufacturing sector – plant operators, truck drivers, educators, health workers and farmhands.

There is reason for hope though, with the WA State Government announcing its $185 million Reconnect WA package, focusing on re-engaging our State with the world as border controls are anticipated to ease in the first quarter of 2022.

Key to the package is a $65 million investment in promoting WA to the world as a safe destination for skilled workers, international students and tourists, while an additional $15 million has been carved out to attract and boost lucrative business conferences hosted in Perth.

A drive to bring more backpackers to WA will support our agriculture sector – albeit potentially too late for the current season with Australia on track to hit record agricultural production value of $78 million this financial year – the largest farmgate commodity value in the nation’s history.

Supply chain constraints

While shortages of people present a significant challenge, supply chain issues are also likely to impact businesses and capacity into 2022.

It’s no secret the construction sector has been slammed by material supply shortages while experiencing an uptick in demand, predominantly spurred by stimulus measures introduced by State and Federal governments.

Revenue for building products businesses remained strong nationally, however, the construction and engineering sector recorded a revenue reduction in excess of 20 per cent, according to McGrathNicol’s 2021 Working Capital Report.

In the IT sector, a backlog in meeting demand for chip technology is having a dramatic impact on the supply of computing, mobile devices and even automotive equipment to hungry consumer markets. The receival time for new cars in Western Australia remains blown out – much of this is due to car manufacturers being unable to obtain the smart chips they need before passing vehicles on to consumers. Mainstream IT hardware itself remains in high demand, with the emergence of work-from-home and hybrid work practices putting strain on retailers and IT providers to access stock.

Ironically, a shortage of metallic boxes that carry 90 per cent of the world’s goods – shipping containers – means businesses and consumers will likely be waiting longer and pay more for raw materials and products in 2022.

The Australian Competition and Consumer Commission’s Container Stevedoring Monitoring Report 2020-21 released last month found there is no silver bullet. In fact, surging demand for containerised cargo and congestion across the global supply chain means further disruption and delays are likely.

Ongoing container shortages mean their price has increased tenfold in the past two years – now costing upward of $33,000 from manufacturers.

Coupled with rising consumer demand, shipping rates being up to seven times higher than normal in the lead up to Christmas and fuel prices remaining higher than years previous, the effects of supply chain issues will likely be felt well into next year and form part of the rising cost matrix businesses will be forced to negotiate.

International tensions

Out of the hands of most West Australians, strained international relations may also become an increasing factor impacting WA’s business sector.

Through late 2020 and into 2021, a range of WA sectors – particularly primary industries – were impacted by significant tariffs and trade sanctions introduced by China – barley, wine and crayfish to name a few.

While some sanctions have eased or been circumvented, the fact China remains our State’s largest trading partner ($140 billion in 2021) and biggest source of international visitor spend ($278 million in 2020) – could have a profound impact on WA business if political pressure ramps back up.

And that could very likely result from the Australian Government’s announcement last week of a diplomatic boycott of China’s 2022 Winter Olympics.

These measures introduce tensions that create a new wave of business uncertainty and risk, most likely unwelcomed by those trying to get on with trade in an ever-evolving environment.

WA open for business

It’s not all doom and gloom though, with WA set to significantly reduce border controls in January or February 2022 should double dose vaccination rates continue in the right direction.

The ability for businesses to resume travelling relatively unrestricted and get back to grassroots transacting will be a boon for WA’s flourishing economy. It should also ease skilled worker shortages, particularly with visa fast-tracking measures put in place by the Federal Government for a number of resources and agriculture-related professions this year.

Along with the global spotlight being cast on Western Australia as one of the safest, cleanest and virus-free places on the planet to live and do business, the outlook in the Golden State is strong for 2022.