CEOs expect 'tentative improvement' amid further weak conditions
The Australian Industry Group's (Ai Group) annual Business Prospects report released Monday (3 February) shows most CEOs expect conditions to remain weak in 2014 although modestly better than in 2013 across manufacturing, construction, services and mining services.
This year's Prospects survey - Slowly Changing Gears - found that 37 per cent of CEOs expect business conditions to improve in 2014 with 35 per cent expecting general business conditions to deteriorate in 2014 and 28 per cent anticipating conditions to be unchanged over the coming year.
Ai Group chief executive, Innes Willox, said: "This year's CEO Survey suggests that 2014 will continue to see only modest growth in production, sales and employment as the economy struggles to rebalance in the face of lower levels of investment in resource projects and lower commodity prices.
"While low interest rates have begun to have an impact in some sectors and while competitiveness has improved with the lower Australian dollar, we are still some way from the required rebound in the non-mining sectors of the economy. In particular, business investment in the non-mining sectors is set to improve only marginally in 2014 from very low levels.
"The challenge for Australian business leaders and policy-makers in 2014 continues to be: How can we 'change gear' from economic growth driven by mining investment to that generated by non-mining business activities? What can we do to best manage this transition process?
"This transition provides important opportunities for governments at both the federal and state levels to put in place policies particularly in the areas of industrial relations, taxation, infrastructure, innovation and in developing the business capabilities and workforce skills to build long-term improvements in competitiveness, productivity and living standards," Willox said.
37 per cent of all CEOs surveyed anticipate an improvement in business conditions in 2014, 35 per cent expect general conditions to deteriorate this year, 28 per cent expect conditions to be unchanged over 2014.
A lack of customer demand is the most common growth problem expected by CEOs in 2014, with 21 per cent of all CEOs nominating this area as one of their top three "growth inhibitors" for the year. Wage pressures (15 per cent of respondents), business regulation (11 per cent) and the exchange rate (10 per cent) are other key areas of concern. Compared to 2013, wages and inflexibilities in industrial relations have become a key concern for more businesses. Reflecting the drop in the Australian dollar over the past year, the exchange rate, while remaining a barrier to growth, is expected by CEOs to be somewhat less of a challenge than it was a year ago. Taken together, the labour market issues of industrial relations arrangements, wages and skill shortages, stand out as the leading areas of concern.
In terms of growth strategies for 2014, At least one-fifth of CEOs in each of the mining services, manufacturing, services and construction sectors plan to focus on improving sales for their current range of products. New products or services are planned by 28 per cent of mining services, 20 per cent of manufacturing and 19 per cent of CEOs heading up services and construction businesses. A focus on building new Australian customers is included in the growth strategies for 21 per cent of construction firms, 16 per cent of services firms, 15 per cent of mining services firms and 14 per cent of manufacturers.
40 per cent of CEOs are expecting another year of contraction in 2014, while a third are anticipating an improvement. Around half of the respondents expect stronger sales revenue. 41 per cent of manufacturing CEOs are planning to cut staff numbers in 2014 while 21 per cent are looking to increase their headcounts. Manufacturers' investment intentions are mixed for 2014, with 32 per cent expecting to increase their expenditure but 31 per cent proposing a cut. The top five growth concerns among manufacturing CEOs for 2014 are a lack of customer demand (24 per cent); import competition (17 per cent); the exchange rate (15 per cent); wage pressures (11 per cent); and the inflexibility of industrial relations arrangements (10 per cent).
CEOs were the most likely of the major industry groups surveyed to expect their general business conditions to deteriorate further in 2014 (46 per cent expect conditions to worsen). There is to be a considerable divergence among the capital investment intentions of mining services firms with 46 per cent looking to increase expenditure but 38 per cent planning to cut. The top five growth concerns among mining services CEOs for 2014 are: lack of customer demand (24 per cent); wage pressures (14 per cent); the inflexibility of industrial relations (14 per cent); import competition (14 per cent) and skill shortages (11 per cent).
CEOs are, on average, the most upbeat about their business conditions in 2014 compared with respondents from other sectors. 44 per cent are expecting an improvement from last year; almost three-quarters expect their sales revenue to rise in 2014. 41 per cent of respondents are planning to hire more employees. The top five growth concerns among services industry CEOs for 2014 are: wage pressures (19 per cent); lack of customer demand (17 per cent); regulatory burdens (16 per cent); skill shortages (12 per cent) and the inflexibility of industrial relations (11 per cent).
CEOs generally expect conditions in their sector to improve in 2014, as early signs of an upturn in residential construction activity are emerging. 30 per cent of construction CEOs expect a lift in business conditions and 57 per cent anticipate higher sales revenue for their business. However, this optimism has not transpired into stronger hiring intentions, with only 14 per cent of construction CEOs expecting to increase headcount.
Have your say...
The approval of your comment is at the discretion of this article's publisher. Write your comment with the following in mind to ensure the highest likelihood of it being approved:
- No promotional undertones
- No use of profanity
- Good spelling, grammar and layout
- Check punctuation, language and missing words
- No use of aggression
- No unsubstantiated claims
We reserve the right to remove comments at our discretion.
Your name is used alongside Comments.