Business research

How WA businesses can position themselves for more growth and opportunity

WA has long been recognized as an economic powerhouse and in 2020-21 it has cemented that reputation, growing through a healthy 4.3% – despite lockdowns, supply chain disruptions and widespread uncertainty. In contrast, the national GDP only increased by 1.5% during the same period.

The state’s national economy has grown 5.7% since the start of the pandemic, according to the WA Government. This makes it the best performer of all states, as well as the only one to record domestic growth in 2019-20 and 2020-21. Meanwhile, its exports reached a record $223 billion in 2020-21, accounting for more than half of the national total.

Since the reopening of state borders earlier this year, things have gone from strength to strength, with NAB’s April 2022 Monthly Business Survey noting that business conditions and confidence have remained strong.

But if the conditions are right, doing business in the post-Covid economic landscape is not without its challenges. NAB Executive for Perth Regina Sun and WA Commercial Real Estate Executive Gary Louis share their insights on what lies ahead for WA businesses – and how they can drive productivity, profitability and growth.

Invest in automation

Staff shortages continue to act as a handbrake for businesses across Australia, and they are particularly acute in the West. January 2022 saw Seek list a huge 75.2 percent more job vacancies in WA than in January 2019, with the greatest demand coming from the trades and services, manufacturing, transport and logistics, and resources and energy sectors.

The imbalance between supply and demand is likely to lead to wage wars in certain sectors. It can also be the catalyst for increased investment in automation, as companies turn to technology to combat labor shortages and propel their operations forward.

“Customers are asking us to connect them with automation experts in their fields, and we’re seeing strong growth in equipment financing – that’s a 27% year-over-year increase – as people are advancing their investment decisions,” says Sun. In the meantime, she notes, global supply chain issues mean it takes a long time to source and commission plants and equipment.

Addressing Supply Chain Disruptions

The new NAB Supply Chain Insights Special Report finds that 35% of small and medium-sized businesses in WA said supply chains were an “important” issue for their business right now, the highest of any state nationally.

By industry, this was a “significant” issue for nearly one in two wholesale SMEs (47%), and was also particularly problematic in manufacturing (44%), retail (37%) and construction (30%). About one in five SMEs (or 21% of) WAs expect supply chain to still be a significant issue in 12 months, which is below the national average of 23%.

Companies were asked what strategies they thought should be implemented to deal with current and future issues. Overwhelmingly, nearly seven in ten (68%) said investing in local manufacturing facilities was essential. About one in two highlighted improving road, rail, sea and air infrastructure (52%) or investing in technologies that reduce time, materials, energy and labor ( 48%). More than four in 10 pointed to investment in education and training (44%) and a relaxation of immigration policies, while just over one in three (35%) cited the promotion of greater international cooperation and new trade agreements.

These supply chain issues are also causing companies to rethink their approach to inventory management, according to Sun. Many are moving from a “just in time” to a “just in case” model, stocking components and products to ensure they can maintain business continuity and fulfill contracts.

It’s a cautious approach, given the well-documented shortages of everything from building materials to foodstuffs that have plagued businesses since the pandemic began. But this has a cost.

“Holding more stocks sounds easy, but it eats away at your cash flow,” says Sun. “Over the past few months, we have worked with many businesses to ensure they have the working capital they need to meet their revised inventory needs and sales cycles, and loans for working capital. turnover increased by 36% year over year.”

Hot property

Meanwhile, WA’s property market is buoyant. Residential rental vacancy rates remain low – The REIWA quarterly survey for April 2022 showed rates of 1.2% and 0.3% in Perth and Albany, respectively – and builders’ books are full until the end of 2023, according to Louis.

The NAB survey of commercial properties for the first quarter of 2022 revealed short and long-term confidence in the outlook for WA’s commercial and industrial sectors.

Although interest rates are on the rise, they remain low by long-term standards, making real estate an attractive investment for local businesses and wealthy individuals, Louis notes.

“Current terms encourage business owners to buy their own space and pay for it, rather than renting it out,” he says.

“WA is consistently rated as one of the most affordable states in the country. It offers some of the best returns, and we will continue to receive many requests from east coast investors, as well as locals.

Partner with a truly local bank

In these changing times, having the support of a bank that understands business and the local economy is essential.

NAB has had a presence in WA for over 150 years and is deeply committed to supporting the state as it continues to make an outsized contribution to Australia’s current economic prosperity.

Many of the bank’s relationships with Western Australian businesses span three generations.

“We supported our clients as they navigated fluctuating geopolitical and market conditions,” says Louis. “And, because we consider ourselves business experts, we’ve brought them together to share insights and ideas to help them optimize their operations.”

“We believe in the West and will continue to support WA, with over 300 local banking experts on the ground,” Sun adds. “As local businesses navigate the challenges and opportunities of the post-Covid economic landscape, we look forward to taking the journey with them, providing them with the funding and support they need to innovate and grow.

Regina Sun
Regional Commercial Banking Manager, WA
[email protected]
+61 467 816 176

Gary Louis
Commercial Real Estate Banking Manager, WA
[email protected]
+61 452 672 003