The Australian Industry Group (AiG) released its 2019 national CEO survey which examines the prospects for business and the economy in the year ahead.

The Business Prospects report found that Australian CEOs expect further growth in the coming year, but for the slowing of activity that began late last year to continue in 2019 due to a mix of local and global factors.

The report identifies key risks for businesses from inside Australia including: uncertainties surrounding the Federal election; concerns over the workings and direction of our workplace relations arrangements; the threat of rising barriers to global trade; the impacts of the housing market downturn; consumer caution; high energy prices; and the continuation of drought conditions in many parts of the country.

Ai Group Chief Executive, Innes Willox, said: “Expectations for 2019 point to moderate lifts in production, sales and employment and for a modest pick-up in inflation and wages. The 2019 slowdown is anticipated to see activity drift downwards rather than fall precipitously.

“While a proportion of the anticipated slowing can be attributed to global factors including heightened trade tensions, geopolitical risks, the slowing of the European recovery and an easing of industrial activity in China, there are a range of factors that are well within our own control that are not attracting the policy attention they deserve.

“The survey presents an underwhelming view of our economic prospects which should be ringing alarm bells in Canberra in this election year. Our political leaders should be setting ambitious goals and making targeted investments that will deliver long-term benefits to our community.

“We need more decisive action from Canberra in a range of areas including workplace relations; energy policy and delivering a better trained and aligned workforce.

“Rather than simply drift with the international tide, Australia should be proactively building on our relative strengths to lift our economic potential and our domestic living standards,” Mr Willox said.

The CEO report identifies key policy areas ripe for action including:

– developing the skills of the current and future workforce;
– developing a stable, effective and bipartisan approach to energy policy to secure the investment needed to reduce price pressures and uncertainties over supply;
– removing the administrative obstructions that are preventing the approval of the enterprise bargaining agreements that were once the foundation of strong productivity and sustainable wages growth;
– investing in developing the domestic business capabilities needed to build more world-class enterprises invested in trade, innovation and high-performance workplaces; and
– committing to improving the effectiveness, fairness and competitiveness of our national taxation arrangements.
The survey included responses from 252 CEOs of private-sector businesses in non-farm sectors from across Australia in late 2018. The businesses surveyed represented companies from all states who together had an aggregate annual turnover of around $72 billion and employed 87,000 Australians.

Summary of key findings:

– General business conditions are expected to be better in 2019 for one third of CEOs, which is a lower proportion than had expected an improvement for 2018 (42%).
– One quarter of CEOs expect their business conditions to deteriorate in 2019, which is the highest such proportion since 2014.
– Business turnover is expected to increase for 58% of businesses in 2019, with 24% expecting no change from 2018 levels and 18% expecting a decline in sales in 2019.
– Profit margins are expected to grow in 46% of businesses in 2019 and fall in 24% of businesses, suggesting that businesses are less optimistic about profit margins for 2019 than they were for 2018.
– The majority of CEOs expect prices to rise for both their inputs (63% of CEOs) and their outputs (52% of CEOs).
– On the input costs side, a higher proportion of businesses expect their input costs to rise in 2019 (63%) than in any of the previous six years.
– This concern about input price changes relates largely (but not solely) to energy pricing. Over two-thirds of CEOs (68%) expect their energy input costs to rise further in 2019. Higher energy prices and reliability of energy supply have become key risks for Australian business across an increasing range of industries and locations.
– Employment (headcount) is expected to increase for 42% of businesses in 2018, with 40% expecting no change and 18% expecting to reduce their business headcount.
– Most CEOs plan to maintain or increase their spending on various types of business investment in 2019.
– When asked which factors would provide the biggest inhibitors to business in 2019, 31% of CEOs identified a ‘lack of customer demand’ as their most significant constraint. Labour market concerns feature prominently for businesses in 2019. The second most pressing concern for CEOs is skill shortages, with 21% of businesses nominating this as their top concern. A further 7% of CEOs said the flexibility of industrial relations is their top concern in 2019, up from 4% in 2018.

To read the full – Ai Group National CEO Business Prospects report for 2019 – click here

Source: Ai Group