The majority of Australia’s company directors saw the election of the Abbott federal government as a big positive. Now only 30% of them think Canberra will have a positive impact on business.
Directors’ confidence in the Coalition government has diminished on the eve of its first budget next Tuesday as concerns about the strength of the local economy dominate business decision making, according to the latest Director Sentiment Index (DSI).
The 32,000-member Australian Institute of Company Directors’ index measures the opinions and future intentions of the director community.
The latest survey shows that overall director sentiment has fallen 6.8 points since the last survey, although sentiment is slightly higher than at the same time last year.
The survey, which was conducted from March 31 to April 13, found that less than 30% of directors believe the federal government’s performance is having a positive impact on both their business decision-making and consumer confidence.
This was a significant turnaround to the last survey for the second half of 2013, taken immediately after the Federal election, when almost 70% of directors expected the new government to have a positive impact on their business decision making and 80% expected it to boost consumer confidence.
The number of directors who believe the government understands business has also slipped to 48% from 55% previously.
“The results suggest the honeymoon period for the Coalition has ended. Directors have indicated that productivity growth is now their biggest economic challenge, followed by issues such as excessive regulation and a lack of spending on infrastructure,” said Company Directors’ chief executive officer and managing director, John Colvin.
“Directors are more pessimistic about the future health of the Australian economy, with just under half expecting it to be weak over the next 12 months. For the first time in the three-year life of the DSI, directors expect the US economy to outperform the domestic economy in the next year.”
Directors expect the exchange rate to further decline over the next 12 months, but inflation, the official cash rate, wages growth and unemployment are expected to increase.
“The DSI results clearly highlight the issues that directors believe the government must tackle to improve their operating environments, facilitate investment and ultimately create more jobs for Australians,” Mr Colvin said.
“The top five issues that directors believe the Coalition should address in the short term are infrastructure, productivity growth, taxation reform, industrial relations and international competitiveness.”
Ahead of what is expected to be a tough Budget containing income tax increases for higher income earners, more than 80% of directors do not view a budget surplus as a priority in the next three years and 60 per cent believe that the level of personal tax in Australia is too high now.
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