According to Deloitte’s latest CFO sentiment report, almost four out of five CFOs are feeling increasingly uncertain about what the new year may bring.
“While still confident, CFOs are also still cautious of what the future might hold. Just as 2016 presented some big global and local political and economic headlines, they also nominated the highest level of uncertainty in the eight-year history of our survey,” Deloitte executive program leader Tom Imbesi said.
“Weak consumer and business sentiment is significant, and 2016 presented some big headlines with real potential to spook business, and this has left 78 per cent of CFOs rating the general level of external financial and economic uncertainty faced by their companies between ‘above normal’ and ‘very high’.”
While it was Donald Trump’s surprise US presidential election win that characterised last year’s atmosphere of uncertainty, the new president is expected to have little short-term impact on Australia.
“[CFOs] are taking Trump in their stride, with more than half foreseeing his presidency as having little to no impact on their companies, at least in the short run,” Mr Imbesi said.
CFO uncertainly largely seems to be a product of the doubt surrounding the Australian government’s efficacy.
“Confidence in the federal government’s ability to respond effectively to economic uncertainty and implement its policies has taken a hit, with corporate tax cuts proposed by the current government an example,” Mr Imbesi said.
“Despite their being a flagship election policy, 75 per cent of CFOs don’t believe cuts will be legislated and of the 2 per cent that do, only 2.2 per cent have confidence that they will be enacted in 2017.”
Meanwhile, there’s a prevailing attitude that the RBA does not need to cut interest rates any further, with many expecting rates to start rising again.
“On interest rates, and like the RBA, CFOs seem untempted by further cuts to interest rates, and only 20 per cent think a further cut would be likely to stimulate investment in their company,” Mr Imbesi said.
“They’ve also reversed their interest rate expectations since earlier in the year. Last time, 48 per cent believed rates would be lower in a year’s time, while this round, 42 per cent believe rates are set to rise.”