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CEO confidence grows despite bushfires

Adam Thorn
14 February 2020 1 minute readShare
CEO confidence grows despite bushfires

Australian and New Zealand CEOs’ confidence grew substantially between December 2019 and January 2020, despite the country’s ongoing bushfire crisis.

The March CEO Confidence Index rose from 101 to 106, with SME business leaders cautiously optimistic through a combination of improvements in the housing and equity market and perceived favourable government policy. 

Warren Hogan, chief economic adviser of The Executive Connection which commissioned the survey, told My Business: “The bushfires don’t seem to have done much damage, and that certainly would have been captured. The economic impacts were quite limited to the areas they hit.”

The index is a quarterly survey measuring the confidence of Australian and New Zealand’s small-business leaders. 

Mr Hogan said the latest findings show a five-point jump that reflects “tentative signs of improvement in early 2020”.

“The rise in confidence suggests businesses are starting to see signals the economy is improving, and leaders’ confidence is inching forward ahead of an anticipated economic recovery,” Mr Hogan said.

“It is clear now the Australian economy experienced a cyclical slowdown in 2018 that stretched into 2019. This was largely a result of falling house prices, weaker consumer spending and slower global economic activity.”

The surprise rise comes despite conditions actually being slightly weaker at the start of 2020, and continue the trend of a slight decline in business conditions since 2018. 

The index’s results were strong across the board. However, expectations of future profitability fell from 144 to 140, and hiring intentions slid four points to 134, compared to the previous quarter.  

“Businesses are in ‘wait and see’ mode, comfortable with their own performance but aware they can’t afford to be in a holding pattern,” Mr Hogan said.  

“After a period of little to no private sector economic growth, businesses are grinding through and looking for confirmation of economic improvement, including a pick-up in property and consumer markets.”

The March quarter 2020 survey was conducted between 10 December 2019 and 24 January 2020, with 165 senior leaders taking part. 

Despite questioning taking place during the worst of Australia’s bushfire crisis, Mr Hogan explained why its impact on national confidence was limited. 

“Despite how horrific they are, the economic impacts are limited to areas they hit,” Mr Hogan said. “And those areas are basically regional Australia where not a lot of economic activity happens. I don’t want to downplay it, but the reality is that there isn’t a lot of business activity in the south coast of NSW or in the far Gippsland in Victoria.”

In other findings, almost 70 per cent of respondents believe inflation would stay between 1 per cent and 2 per cent in 2020, and 15 per cent expect inflation to be between 2 per cent and 3 per cent, in line with the RBA’s target.

CEO confidence grows despite bushfires
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Adam Thorn

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