Optimism of Australian CEOs nosedives to record high
Optimism of chief executive officers about the global and Australian economy has slumped to a record low, according to a new study by PwC. For this year, 59% of Australian business leaders expect global GDP to fall and only 31% think they will be able to grow the revenue of their company.
The results come at a time of growing pessimism on the worldwide economy, despite the fact that the world’s most powerful economy the US is booking its strongest run of performance since the 2008 financial crisis. Just last week, the US government unveiled that the country’s unemployment rate has dropped to a 50-year low of 3.5%.
However, the US is arguably also one of the reasons why countries and corporates outside of the economic superpower are seeing a growing number of clouds come their way. Trade tensions between among other the US and China and Iran, and geopolitical issues, have put the brakes on international trade growth. The recent Coronavirus outbreak has amplified this effect through the restriction on the flow of ‘made in China’ products and goods.
Meanwhile, the lack of agreement on how to deal with climate change is also taking its toll. Just how big the consequences of climate negligence can be are illustrated best in Australia, where months of bushfires and more recently rain showers have majorly hit the economy, and more so the daily life of Australians.
According to Bob Moritz, the Chairman of PwC, “the uncertainty we see today, and the scale of challenges and the speed at which they are escalating is unprecedented in the last 40 years. As a result, it’s taking growth out of the global economy.”
Moritz made the comments at the World Economic Forum in Davos last month, where PwC unveiled the findings of its Global CEO Survey. One of the key conclusions was that 53% of CEO’s project a decline in the rate of global economic growth this year, up sharply from 29% last year.
Now, PwC’s localised version of the study shows that Australian CEO’s are slightly more pessimistic, even demonstrating the highest level of pessimism since the consulting firm started conducting the analysis domestically in 2012. 59% predict a decline in global GDP in 2020, up from just 7% two years ago. Luke Sayers, the CEO of PwC Australia said: “The big increase in pessimism is not surprising given the ongoing uncertainty over trade tensions, geopolitical issues and climate change.”
Despite the broadly comparable outlook, Australian CEO’s are responding in a more defensive manner. “While global CEO’s are responding with proactive growth strategies, many local CEOs are focusing their response on cost cutting and operational efficiency initiatives,” said Sayers.
Climate change
Not surprisingly, Australian CEO’s are more so concerned about climate change than their peers in Europe or North America. Nearly two thirds of CEOs now see climate change as a major threat, with concerns increasing year on year over a 10 year period. There is also limited confidence amongst Australian CEOs that the right solutions are in place to mitigate the climate change threat, with only 12% of Australian CEOs believing business and government collaboration is effectively mitigating climate change risks, compared to around 33% of CEOs globally.
According to Mark Coughlin, the leader of PwC’s Energy Utilities & Resources practice in the country, “there’s no doubt Australia’s extreme and devastating fire season has brought to the fore the immediate challenge of setting a clear and positive direction for Australia’s climate policies, and business and government collaboration is the linchpin.”
Globally, CEO’s in Japan have the lowest pessimism, with only 11% very confident of growing revenues in 2020. Among major economies, counterparts in China and India show the highest levels of confidence they will grow revenues in 2020, at 45% and 40% respectively. With a score of 33% Australia ranks in the bottom tier of optimism.
