Deloitte: Uncertainty over Federal Government policy is making Australian CFOs more risk-averse

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Australian chief financial officers are becoming more risk-averse, with their confidence levels subdued under the weight of uncertainty over Federal Government policy, says a Deloitte survey.

They are slightly more positive about the financial prospects for their companies than they were three months ago. A net 6% of CFOs in the three months to the end of December were more optimistic compared to 2% in the previous quarter.

However, according to the Deloitte survey of 52 CFOs, the sentiment is finely balanced and is a long way from the levels caused by genuine business momentum reported 12 months ago.

“A major restraint on optimism levels has been uncertainty over Federal Government policy,” Deloitte says.

This is a negative factor for 62% of CFOs, returning to the levels last seen in the second quarter of 2013 in the run up to the last Federal election.

While the change of government at the time reversed the trend just after the election, Deloitte says CFO optimism has been on a downhill slide since, reflecting budget reform battles and the current impasse in the Senate.

Source: Deloitte CFO survey

A number of consumer and business confidence measures show continuing concern about the economy and the Federal Budget.

The softening Chinese economy worries 46% of CFOs, the worst result recorded since 2013.

The optimism of Australian CFOs is also restrained relative to their peers in both the UK and the US. American CFOs have continued a remarkable run of business confidence with 33% feeling more optimistic than three months ago – the seventh
straight quarter of positive results.

Only 27% of Australian CFOs indicated now is a good time to take on more financial risk. This is the third straight quarter this measure has declined since its recorded highs at the beginning of 2014.

And 85% of CFOs believe this uncertainty will last for at least a year or more.

While only 19% of CFOs see themselves as taking on more risk than their industry peers, 56% see themselves as more risk-averse. This distortion indicates that risk aversion has become more pervasive in the minds of Australian CFOs.

The 52 CFOs surveyed represent businesses with a combined market value of about $252 billion or 15% of the Australian quoted equity market.

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