Aussie CEOs cautious, see business conditions to improve in 2017

Fewer Aussie chief executive officers (CEOs) expect business conditions to improve this year than in the previous year, according to AI Group's Business outlook survey. The survey showed that 95 of 285 CEOs are cautious yet optimistic in seeing improvement in 2017. Respondents expect that over the year, their respective companies will experience deterioration including falling profit margins. The outlook comes after the very gradual recovery from the global financial crisis.

Based on the result, CEOs expect to see improvement in business conditions in 2017. However, the optimism has decreased to 33 percent compared to the 39 percent of CEOs who expected better conditions in 2016. Fourty-four percent forecast stable conditions this year. Half of respondents expect an improvement in company sales revenue while 42 percent expect profit growth.

AI Group chief executive Innes Willox pointed out that many foundations for domestic growth are already in place including low interest rates, low unemployment and stronger commodity prices. Low wage and inflationary pressures, lower trading range for the Australian dollar and recovery in real national incomes were also included.

The study considered several performance indicators that may keep CEOs optimistic in 2017. In terms of business conditions, 33 percent of respondents foresee improvement. The business sales turnover is expected to increase by 51 percent while the export revenue is expected to increase by 19 percent. The gross profit margins and labour productivity are expected to grow in 42 percent of businesses.

On the other hand, significant risks were also identified by the study, specifically the Australian business environment. It included the state of business investment and state of energy market. Based on the survey, 51 percent of businesses expect their energy prices will increase in 2017. The result adds to arguments that the government needs to prioritise addressing the lack of energy affordability and energy reliability that industries have faced.

The fate of the Australian dollar is expected to be a key risk to the country's economy and export performance. CEOs hope that the average of 75 US cents will remain on a long-term basis, the study said. Business investment is also expected to be a risk area where non-mining business investments would recover slower than required.

Willox said that the bipartisan support for the Government's business tax reform measures will support any movement for business expansion.