Australian CEOs are less confident now about growth prospects for their companies than they were a year ago.
Most of them (73%) plan to cut costs in 2016 and a lot of them (41%) will be getting rid of staff.
PwC’s 19th Annual Global CEO Survey, launched at the World Economic Forum in Davos, Switzerland, shows that only about a third of Australian CEOs are very confident they will see revenue growth, down from 43% last year.
And only 31% expect an increase in global economic growth this year, down from 38% in 2015. Most (57%) expect growth to remain the same.
Forty-nine Australian CEOs, including Wesfarmers chief executive Richard Goyder, Mirvac’s Susan Lloyd-Hurwitz, and Airtasker head Tim Fung, and more than 1,400 globally were involved in the survey.
“Australia’s twenty-four years of uninterrupted economic growth is frequently highlighted, but we mustn’t forget the history of difficult reforms that made this record possible,” says Luke Sayers, the CEO of PwC Australia.
“If the next quarter-century is going to look anything like the last, it’s crucial that the lessons of the past are applied. In 2016 we need to see a shared vision and a long-term economic and fiscal plan that outlives the next election cycle.”
The survey also canvassed CEOs on how they plan to respond to the clouded global economic outlook and domestic growth prospects.
A top priority for the majority of Australian CEOs (73%) is cost cutting, ahead of entering into a new joint-venture or alliance (53%).
This focus on cost-control has played out as a substantial shift in hiring, with 41% saying they will reduce headcount in 2016, compared with just 12% in 2015.
However, corporate Australia may be reaching the point where the balance has gone too far in favour of cost management over investment.
“The cost-cutting cycle has more or less continued since the financial crisis, so you have to question whether organisations are now starting to cut muscle rather than fat,” says Sayers.
“You can’t cut your way to growth, so companies that want to prosper over the longer term should be looking at where they can make judicious investments, particularly in innovation, technology, and entering Asian markets.”
China was named as the top overseas growth market by a majority of Australian CEOs (63%), behind the USA (51%).
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