It’s encouraging to see confidence is the mood in the Australian perspectives expressed in KPMG’s latest CEO Study 2019 released to the national market today. This is the fifth year our global firm has conducted a detailed look at CEO views of the future and it provides us with a vital look at the driving themes for next three years.
Australian CEOs are defying the current economic outlook, and expressing confidence about local growth prospects between now and the end of 2022. They are more upbeat on company prospects than their overseas counterparts and most are planning investments in workforce digital skills and capital technology
This is despite the current economic uncertainty, reflected in yesterday’s rate cut to a record 1.25 percent. KPMG CEOs were interviewed in early 2019 and, while there has definitely been a slowing in the economy since then, there is still a measured confidence among our local business leaders as they look to 2022.
More than half (58 percent) of Australia’s CEOs are ‘very confident’ about their company’s prospects between now and then. This is a significant rise from just 22 percent in last year’s survey. Most of the others (38 percent) said they were at least ‘confident’ as they look ahead.
The mood extends to prospects for Australia as a whole. Notably, 44 percent said they were very confident about our national growth prospects, compared to 20 percent in 2018. This was lower than the views of their global counterparts about their own countries, although the gap was reduced from last year.
There’s also a strong ‘future focus’ in the CEO study findings. I’d say they confirm that acting with agility is the new currency of business. ‘If we’re too slow we will be bankrupt’ say 80 percent of Australian CEOs. Most believe a ‘safe to fail’ culture is required, yet concede their company does not have it. These findings certainly align with our own firm’s approach to assisting and supporting clients and the key areas of demand.
In helping business become more agile, a framework of confidence in growth is a vital element. Post the 18 May Federal election outcome, we must capitalise on that underlying confidence with government using its fresh mandate to reinvigorate policies which will stimulate the economy.
However, I don’t believe we can only rely on monetary policy. If the mooted tax cuts can get through the Senate that will boost consumer spending, while wider tax reform – although politically difficult – would help boost our international competitiveness. I would reinforce the message that productivity is still the key to business and wages growth and well- targeted infrastructure spending will help. With 10-year bond yields at record lows, there has never been a time when it’s cheaper to deliver Infrastructure Australia’s long-list of priority projects.
Less Confidence about Global Economy
The confidence story did not extend overseas however. In other CEO Study 2019 findings, Australian CEOs expressed much less confidence when considering the global economy compared to their overseas equivalents.
It’s interesting in comparison to the Australian outlook that just over a third – only 38 percent – were either confident or very confident about growth prospects for the global economy over the next three years – compared to 63 percent of overseas CEOs. This was a sizeable fall from the 77 percent vote of confidence in the global economy’s prospects cited by Australian CEOs a year ago.
The number of Australian CEOs expressing confidence in their industry’s prospects also dropped compared to 2018. Just 22 percent were very confident about the next three years, a fall from 32 percent a year ago. Again this was a lower percentage than their overseas counterparts.
Cautious on Growth Outlook
In terms of top-line revenue growth predictions, 38 percent of Australian CEOs believed their company would enjoy 2-5 percent growth, while nearly two-thirds (64 percent) thought it would be up to 2 percent. None of them tipped growth above 5 percent, as a small minority did last year. Overall, this was lower than overseas CEOs, nearly half (46 percent) of whom predicted growth of over 2 percent.
On headcount, 86 percent of Australian CEOs believed their people numbers would increase over the next three years: most by less than 5 percent, but 28 percent of respondents thought by 6-10 percent, with 2 percent believing their staff numbers would grow by more than 10 percent. This was slightly lower overall than overseas CEOs.
Nonetheless, like last year, Australian CEOs reported that their companies are proactively recruiting the talent and skills needed rather than waiting to see if they hit growth targets before hiring – unlike most overseas CEOs.
Personal Lessons from CEOs
One of my own takeaways from this year’s CEO Study comes from the personal experiences of CEOs. More than two-thirds said they believed they were responsible for ensuring seamless connection between the front, middle and back offices to improve customer and brand experience in a way their predecessors were not.
A similar majority said they were personally leading the technology strategy and were actively transforming their leadership team to enhance the company’s resilience. A majority said their use of cloud technologies would increase in the next three years, although this was a smaller number than overseas.
These are just the sorts of issues I have been dealing with myself as CEO of KPMG Australia. Our firm is well advanced in its own agility and transformation milestones. With confidence and a positive outlook, we will successfully support our client’s business growth through the next period as we look toward 2022 and beyond.