Directors getting on with business in uncertain times

The bi-annual Director Sentiment Index shows that business is planning to increase investment and boost employment over the next 12 months, despite global political and economic uncertainty seeing the overall sentiment among Australian directors drop by 5 points.

In the year ahead, 34 per cent of directors expect their business to increase both staffing levels and investment. Indeed, expectations in these areas are at their highest levels in three years.

General business confidence has also increased by 10 points since July this year and is now at its highest level since 2013.

The Director Sentiment Index, conducted by Ipsos on behalf of the AICD, is the only indicator measuring the opinions and future intentions of directors on a range of issues including Australian and world economies, government policy and governance regulations.

Managing Director & CEO of the AICD, John Brogden, said the results of Brexit and the US election have clearly dented overall sentiment.

“2016 will be a year that we’ll be talking about decades from now. It has surprised us and stunned us at almost every turn,” he said.

“That is reflected in the fact that directors rated global economic uncertainty as the number one economic challenge currently facing Australian business.

“The encouraging news is that despite global headwinds and pessimism regarding the Australian Government’s ability to deliver real reform, directors are getting on with business themselves.

“Directors are planning to invest more and hire more people which is great news for Australians and our economy.

“Directors’ confidence about the growth of their business in the next 12 months is also at its highest point since 2011.”

The Index also shows directors are concerned with the state of policymaking in Australia.

Almost 80 per cent of directors said that the Federal Government is negatively impacting consumer confidence, and only 8 per cent of directors feel that the Government’s performance is having a positive impact on business decision making.

Directors are also concerned about a lack of infrastructure investment, taxation reform and the size of the federal budget deficit.

“Directors have been crying out for many years now for the government to invest in infrastructure,” Mr Brogden said.

“Interestingly, for the first time directors have identified renewable energy sources as the top priority for infrastructure investment, followed by regional infrastructure and roads.”

The DSI represents all sectors including private business (43 per cent of respondents), not-for-profit organisations (33 per cent) and listed companies (11 per cent).

Other Key Findings of the 2nd Half 2016 Director Sentiment Index:

• Directors identified global economic uncertainty (30 per cent), low productivity growth (26 per cent) and a slowdown in China (25 per cent) as the main economic challenges facing Australian business.
• 71 per cent of directors believe there is a risk-averse decision making culture on Australian boards.
• Directors identified economic policy uncertainty (38 per cent), political instability (33 per cent) and short-termism (32 per cent) as the top three issues likely to be most disruptive to their business over the next decade.
• Directors identified sustainability & long-term growth prospects (40 per cent), structural change/changing business models (26 per cent) and corporate culture (23 per cent) as the issues most likely to keep them ‘awake at night’.

To access our Director Sentiment Index reports, please click here.