Director confidence hits two-year low

With the federal election just a month away, the confidence of Australia’s company directors is at its lowest point in over two years, according to the latest Australian Institute of Company Directors’ (AICD) Director Sentiment Index.

Overall director sentiment has fallen over 21 points to minus 16.9 over the last six months.

The AICD said the pessimism is largely driven by a fall in confidence about the health of the Australian, Asian, US and European economies over the next 12 months.

The AICD survey is a measure of the opinions and future intentions of directors on a range of economic, policy, regulatory and social issues.

The survey revealed directors believe personal income tax, corporate tax and state-based taxes such as stamp duty are the priorities for any comprehensive reform of the tax system.

Nearly half (46 per cent) of directors expect interest rates to fall in the next 12 months.

Just over 8 out of 10 directors rate the current quality of public policy debate in Australia as poor, and 70 per cent of directors think there is a risk-averse culture on Australian boards with a focus on compliance over performance being the primary driver.

AICD managing director Angus Armour said directors are bracing for weaker economic conditions both at home and abroad over the next 12 months.

“Directors have nominated global economic uncertainty as the main economic challenge facing Australian business,” he said.

“Unsurprisingly, this has an impact on the decisions directors are making for their own organisations and they expect investment and new jobs to fall over the coming year.

“A majority of directors now also expect unemployment to increase which points to deterioration in the labour market.”

The Index also reveals how directors are responding to a changing governance environment post the Financial Services Royal Commission.

“91 per cent of directors say their board is taking action to improve the culture of their organisation,” he said.

“They also nominate the need to demonstrate greater respect for customer and communities as a priority for boards to regain community trust.”