The PwC CEO Survey 2017 says Australian CEOs are more bullish than they were last year. They also expect more growth compared to their international peers. But is this confidence realistic in the face of both global and domestic uncertainty?
How justified is this optimism?
Only last year there was evidence of cost cutting and Australia’s CEOs trying to ‘squeeze the lemon’ a bit harder in a bid for growth.
Yet none of the challenges that our business leaders faced then have gone away. In fact, they’ve now got a few more to contend with.
Domestically, the economic outlook remains flat despite the recent uptick in commodity prices. Low wages growth continues to put a handbrake on consumer confidence and spending; slowing productivity continues to be a challenge for business.
The fall in economic growth in the September 2016 quarter was the largest contraction seen since the global financial crisis.
On top of this, the new US administration has created some very real risks for Australian businesses. The stated goal of lowering corporate tax rates in the US would pose a major threat to investment in Australia, while any potentially acrimonious trade negotiations between the US and China – our two biggest trading partners – would be significant for Australia.
Globally, the outlook is more uncertain than it was 12 months ago. The world is yet to feel the full impact of a ‘hard Brexit’, let alone the economic consequences of a Trump Presidency.
The optimism could be because the ‘post mining boom cliff’ wasn’t as steep as everyone expected, the construction boom and commodity price rebound has delivered Australia a ‘get out of jail free’ card. But the fact remains that these are short-term events.
Modelling predicts that if Australia stays on its current economic trajectory, we will fall out of the world’s 20 largest economies by 2030.
Despite all this, Australia’s CEOs are stepping up and planning for growth.
Compared to this time last year plans to increase headcount and undertake M&A are up, while plans for cost reduction programs and outsourcings are both down. And almost all have plans for organic growth.
But is this just ‘more of the same’, when what’s really needed in the current global economic and geopolitical environment is deeper, more radical change?
Are leaders at risk of being overly optimistic, of not fully grasping the bigger picture?
There are five key areas for CEOs to consider to bring long-term, sustainable success including trust, talent, customers, Asia and cyber. Key findings around these areas are as follows:
65% of CEOs are concerned about the lack of trust in business.
70% CEOs are rethinking their HR function
79% of CEOs are concerned about changing customer behaviours
79% of CEOs rate USA and China as the important countries for their organisation’s overall growth prospects in the next 12 months
80% of CEOs are concerned about Cyber threats
For more on the PwC CEO Survey 2017 go to http://pwc.to/2kAvoIM