Growth now key issue for WA industry

WA firms are increasing plans to spend and have signalled they have stopped laying off staff, a key measure of the WA economy shows.

But the WA Chamber of Commerce and Industry-Westpac survey of business expectations, to be released today, shows the State's firms have become less confident in the past three months.

The falling confidence reflects a fall in profitability for almost half of the firms surveyed, with mining and farming particularly hard hit.

More than 40 per cent of firms believe economic conditions will weaken this year compared with a third in the December survey.

But despite this fall in confidence, the action of firms in coming months suggests an improvement is on the cards.

Almost three-quarters of firms expected to increase capital spending over the coming year - the second consecutive quarter of a pick-up in spending plans.

Recruitment activity across the State also appears to have stabilised after falling sharply in the second half of last year.

Unemployment hit a 10-year high of 5.9 per cent last month and the survey showed a second consecutive lift in people looking for work.

Chamber chief economist John Nicolaou said though confidence was down, it was not hitting capital spending plans.

"Despite the current challenging environment, these results confirm that many West Australian businesses are looking at growing their operations in the year ahead," he said.

"With the economy in transition as the resources investment boom reaches its peak, this is a positive sign that other sectors of the economy will start to play a greater role in driving economic growth."

The lift in capital spending, however, is unlikely to be driven by the mining sector. The survey revealed the manufacturing sector, hit by the strong dollar for the past five years, is the most ambitious in terms of capital spending. The property and business sectors were also looking to expand as well as the construction industry.

Developing new products (59 per cent), hiring new staff (57 per cent) and investing in education and training (52 per cent) were noted as key areas by more than half of those firms looking to expand.