Australian CEOs are more optimistic about their companies’ growth prospects than a year ago and are more bullish on global growth prospects than their international peers.
The Australian edition of PwC’s 20th Annual Global CEO Survey shows 43 percent of Australian CEOs are ‘very confident’ they will see revenue growth in the next 12 months, up from a third of CEOs a year ago, and compared to 38 percent globally.
Australian CEOs are also positive on global growth prospects with 36 percent expecting an increase in global economic growth this year compared to 29 percent on average globally.
Their plans for the next 12 months reflect this optimism with nearly all Australian CEOs planning for organic growth (93 percent) and plans for M&A also up (60 percent). Plans for cost reduction are up as well (65 percent), but Australian CEOs are not just going after the low-hanging fruit with almost half expecting to increase headcount this year (48 percent).
PwC Australia CEO Luke Sayers says Australian CEOs are getting on with business, despite continuing uncertainty at a policy level.
“A couple of years ago CEOs were waiting for bold reform. Today, they are getting on with reshaping their businesses for the future, whilst simultaneously keeping pressure on government for bold, longer term thinking.
“The bottom line is we need reform to ensure Australian businesses continue to be globally competitive. In the absence of this, it’s fantastic to see CEOs positively investing in the transformation and growth of their businesses rather than waiting.
“To spur innovation and grow the industries and services of the future we need action in areas including tax reform, infrastructure development, investment in science, technology, engineering, and maths education, and deeper engagement, beyond simply trade, with our neighbours in Asia.
“We also need to ensure those people who trained for the jobs of the past aren’t left behind and that they have the skills and opportunities required for the jobs of the future,” he said.
Interest in China as growth market stagnating
For the first time since we started asking the question seven years ago, China and the US tied for the top offshore market for growth, with 24 percent of Australian CEOs naming China and 24 percent naming the US.
China has been the number one country that Australian CEOs considered important for their company's overall growth for the past seven years, but this year interest in the US, which consistently comes in second place, has slightly increased. However, the Asia region is still favoured overall, with 52 percent of Australian CEOs naming a country in Asia as their top offshore market for growth.
After China and the US, the most important markets identified for growth by Australian CEOs are: the UK (19 percent), Japan (17 percent), India (16 percent), New Zealand (15 percent), and Singapore (11 percent).
PwC Australia Asia Practice Leader Andrew Parker says it is encouraging to see more than half of Australian CEOs now looking to Asia as the primary source of offshore growth and highlighted the importance of playing the long game in the region.
“It’s understandable that some Australian CEOs are turning their eyes away from China given the short to medium term risks in the economy, but this is short-sighted and the increasing interest in the US is a case of running back to what we know.
“The US economy might have got a green tick from the IMF in January and is looking stronger despite the current policy uncertainty, but the US is growing at around 2 per cent annually whereas China is growing at around 6.5 per cent and adds more than $US700bn to its GDP every year. That’s about a third of global growth and two-thirds of the Australian economy every year.
“There is no doubt that China is going through a difficult period of transition from very high levels of growth to more sustainable levels as the Chinese Government makes room for painful but necessary economic reforms. Some turbulence is to be expected, but we should not lose sight of the fact that China is the world’s largest economy in purchasing power parity (PPP) terms. There is little doubt over a longer time frame China remains a strong long-term contributor to Australia’s economic growth prospects. By 2050, we’re predicting the Chinese economy will be 30 percent larger than the next largest economy, India, in PPP terms.
“At the same time, we shouldn’t put all our eggs in the same basket when it comes to Asia so it’s good to see increasing interest in Japan, India and Singapore. There is also significant opportunity in the fast growing emerging economies such as India and also Indonesia, the Philippines, Vietnam and Thailand. This is where the bulk of economic growth will be in the next thirty years.”
Still positive on globalisation
The survey also canvassed CEOs on their views of globalisation with Australian CEOs agreeing with their international peers that it’s becoming harder to balance globalisation with rising trends in protection (57 percent agree or strongly agree compared to 58 percent globally).
Australian CEOs are largely positive about the contribution of globalisation to the free movement of capital, goods, and people (51 percent think it has helped ‘to a large extent’ and 43 percent ‘to some extent’), and in terms of enabling universal connectivity (58 percent believe it has helped ‘to a large extent’ and 38 percent ‘to some extent’). However, respondents are sceptical it has helped close the gap between rich and poor (49 percent said ‘not at all’).
PwC Australia CEO Luke Sayers, says: “It’s encouraging that Australian CEOs are alive to community concerns about who actually benefits from free-trade and globalisation. There’s a lot at stake if we do not achieve inclusive growth,” he said.
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