Resilience of WA businesses to be tested with recession

The West Australian
Chris Shellabear, principal of Shellabears with Kate Gale, Hettie Scholes and Rosemary Ciallella.
Chris Shellabear, principal of Shellabears with Kate Gale, Hettie Scholes and Rosemary Ciallella. Credit: Ian Munro

Job security will be a major concern in WA as employees and businesses are likely to bear the brunt of the nation’s recession, according to industry analysts.

Nigel Plowman, founding director of WA-based accountants and financial advisers McKinley Plowman, said companies that relied on customers’ discretionary spending habits were likely to be hit hard.

“This will include hospitality, tourism, beauty and personal services, fashion, entertainment, along with the various industries which service the affected industries,” he said.

“Commercial property owners will be impacted due to their tenants’ ability to pay rents.

“This will be coupled by the banks becoming increasingly nervous about their exposure to the sector.”

Australia officially went into recession yesterday for the first time in 29 years after posting a 7 per cent fall in the June quarter GDP — the biggest since records started in 1959.

The data from the Australian Bureau of Statistics showed State final demand — a measure of the WA economy excluding exports — dropped 6 per cent, by far the biggest quarterly fall on record. But WA’s June quarter result was better than the national average of 7.4 per cent.

Chris Shellabears, principal of 95-year-old WA real estate agency Shellabears, knows a thing or two about a recession.

Since entering WA’s property industry in the late 1970s, Mr Shellabear has experienced the credit squeeze of the early 1980s, the stock market crash of 1987, the early 1990s recession, Y2K, and the long road back from the 2007 global financial crisis.

“What I’ve learnt over the years is that markets don’t return to normal, you have to understand how the market is evolving so that you can position your business for survival, and/or growth,” he said.

“What’s interesting about these harder times and downturns is that these markets create opportunities for you to innovate, and to get customers from other people whom are in a mindset of things being tough.

“People need to find the opportunities that are there within their sector, and try and exploit that.”

Mr Plowman said WA businesses had generally fared well during COVID-19, which increased their chances not only of surviving but in some cases, of excelling during the recession.

“Many businesses have been extremely frugal with the Government’s stimulus packages and are now in a fortunate position of having cash reserves,” he said.

“We are seeing various clients who are doing better now than they were before.”

Chamber of Commerce and Industry WA chief economist Aaron Morey, pictured left, said for the time being, WA had passed through the first storm front.

“We’ve just gotten the data for the June quarter, we’ve actually just lived through the September quarter, and we’ve seen some returning strength to the economy, particularly in the payroll jobs data,” he said.

“I think we’ve passed the worst and now we’re currently in the eye of the storm where parts of the economy seem pretty calm.

“We’re being propped up by the significant fiscal support measures.”

Mr Morey said the second storm front would hit when eligibility for JobKeeper tightened or was withdrawn.

“The question is ‘how bad is it going to be?’,” he said.