Australian Business Leaders Are Downbeat On Growth For 2015

Getty/Ezra Shaw

Glenn Stevens’ entreaty that business leaders loose their animal spirits looks like it is going to fall on deaf ears again in 2015 with the Australian Industry Group’s (AiG) annual survey of Australian CEOs showing they’re still wary of investing for growth.

The survey indicated that 38% of CEOs are looking for a “further deterioration” in business conditions this year while only 24% expect conditions will improve. When you add back the 38% of CEOs who think 2015 will see things “stay the same”, there is a resounding 76% of Australian CEOs who are expecting conditions to be the same or worse.

That’s a big handbrake on investment and job creation.

Even against this backdrop, 49% of businesses expect higher sales volumes 2015 relative to 2014. That’s a small positive in an otherwise gloomy outlook even though 27% of businesses are expecting sales to fall.

On the all-important employment front, the positive news that 34% of employers are planning to increase employment is balanced by 22% saying they will reduce staff numbers while a huge wedge in the middle – 44% of Australian CEOs – say 2015 will see no change.

The survey reported that the key concerns CEOs hold for 2015 are a lack of customer demand (25%), wage and cost pressures (15%) and competition from imports (12%).

Source: AiG

The survey is a great snapshot into the minds of Australian CEOs and shows the rebalancing necessary for the Australian economy remains narrow and elusive.

But the good news in the survey is that CEOs are still looking outward for opportunities to grow their businesses and are not yet hunkered down and circling the wagons.

AiG CEO Innes Willox said:

As they confront this patchy outlook, CEOs are taking steps to lift the performance of their own businesses. With broadly similar results across industries, the major strategies CEOs anticipate adopting are growing sales of existing products and services; introducing new products or services; and developing new domestic markets. Interestingly, these approaches rank ahead of further downsizing and cost cutting which were the leading strategies adopted by businesses in 2014. While cost cutting remains on the agenda for many businesses in 2015, there is much greater emphasis on proactive measures to improve business markets, viability and profitability

But try as they might, Willox says that the major implication of the business survey for policy makers is that “Australia is struggling to unearth the new sources of growth needed to re-energise and rebalance our economy.”

Willox also has a message for Canberra and the Government saying that governments “also have critical roles to play – to improve confidence and to help create the conditions for more decisive improvements in business competitiveness”.

This and the recent NAB survey highlight that business confidence remains fragile – the RBA will certainly take this into its deliberations at its board meeting tomorrow.

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