PwC’s CEO Survey shows that CEOs in Australia expect both local and global business conditions in 2023 to be tougher than last year. However we're optimistic that, in general, Australian businesses will be able to mitigate the short-term impacts from inflation and interest rate rises.
We believe the more difficult leadership challenge is keeping up the pace of business transformation.
As companies seek to be both human-led and tech-powered, CEOs need to find a new equation between people and technology to ensure the long-term growth aspirations of our companies.
The CEO Survey data is clear: the No.1 problem facing CEOs in Australia is ensuring our companies have the right skill sets. It’s not only an issue for right now - it’s one of the biggest drivers of disruption over the next decade.
We need to upskill and reskill our workforces, and develop talent pipelines for future skills, as we adapt to technologies such as automation and AI. Almost nine in 10 CEOs in Australia say they are investing in upskilling in 2023 - a higher level than our global counterparts.
Meanwhile, Australia’s CEOs are more worried than their global peers about the increasing risks from cyber attacks and climate change.
As CEOs seek to find solutions to these important problems facing not just our own companies but also the society we operate in, PwC’s survey data shows there are still plenty of opportunities for businesses to broaden collaboration outside of traditional industries and to work together with governments, academics, entrepreneurs and the not-for-profit sector.
We’ve already come through a period of digital disruption, pandemic shutdowns and economic shocks, but we still might experience more transformation over the next 10 years than we’ve seen in the past 50.
Economic outlook and business confidence
CEOs expect the Australian economy to perform better than the global economy in 2023
Australia’s economic growth, like much of the rest of the world, is slowing in 2023. But Australia’s CEOs are more optimistic than their overseas counterparts, and for good reason. Australia’s economic success and recovery through the COVID-19 pandemic means business conditions remain stronger when compared with peers in North America, Europe and even Asia.
PwC’s CEO Survey shows that 70% of CEOs expect Australian economic growth to be weaker in 2023. This is largely due to the shocks we have experienced along with the rest of the world, coupled with higher interest rates. But CEOs in Australia anticipate inflation pressures will be transitory - an issue for the next 12 months perhaps, but not beyond, and a view that is consistent with PwC’s own expectations.
How do you believe economic growth (i.e. gross domestic product) will change, if at all, over the next 12 months in Australia?
Source: PwC's 26th Annual Global Survey
How do you believe economic growth (i.e. gross domestic product) will change, if at all, over the next 12 months in the global economy?
Source: PwC's 26th Annual Global Survey
CEOs are protecting short-term profit margins and long-term growth plans
Australian businesses have been able to adjust to the current economic conditions because consumption in Australia has remained strong, despite higher inflation, higher interest rates and lower household disposable income.
The durability of consumer appetite in the face of these headwinds can be chalked up to a tight jobs market that offers confidence about the outlook for household income, alongside the savings that households accumulated during the pandemic.
For business, this means margins are being restored, while CEOs continue to focus on innovation in products and adjust to changes in supply chains.
While business sentiment surveys remain weak, our CEO Survey indicates less than half of CEOs are planning to slow business investment, delay deals or implement a hiring freeze. Less than 25% of CEOs anticipate job cuts or pay cuts, which is a positive signal for the broader Australian economy and the Australian consumer going forward.
In fact, Australia’s tight labour market remains a top concern for CEOs, as expressed by the focus on upskilling workers and automating systems. We anticipate that as the economy starts to slow and international migration picks up, we may see the churn in the jobs market slow and pressures on wages start to ease. Signs of a softening labour market will give the RBA confidence that a wage-price spiral has been avoided and the rate hike cycle can end, a position that we anticipate will be reached midway through 2023.
Which of the following options best describes any action your company may be considering to mitigate against potential economic challenges and volatility in the next 12 months?
Source: PwC's 26th Annual Global Survey
CEOs in Australia are increasing cybersecurity in response to geopolitical conflict
Almost four in five CEOs are increasing investments in cybersecurity or data privacy in response to geopolitical conflicts, compared to 48% globally - likely a reflection of the high profile cyber attacks experienced in Australia last year.
Aside from cyber risks, CEOs in Australia overall seem less concerned than their global peers about the potential impact of geopolitical risks and resulting economic uncertainty, including less likelihood to adjust their supply chains (38% in Australia compared to 46% globally) - perhaps a reflection of Australia’s physical distance to major conflicts.
Which of the following actions, if any, is your company considering to mitigate against exposure to geopolitical conflict over the next 12 months?
Source: PwC's 26th Annual Global Survey
Despite the immediate challenges, CEOs in Australia are still broadly confident in their own company’s revenue growth, down from the year before but better than during the Global Financial Crisis (GFC).
How confident are you about your company’s prospects for revenue growth over the next 12 months?
Source: PwC's 26th Annual Global Survey
Source: PwC's 26th Annual Global Survey
Skills shortages, cybersecurity and climate change
CEOs’ biggest concern is ensuring their companies have the right skill sets
About three quarters of CEOs in Australia say that issues related to workforce management and skills are the biggest challenges facing their business in 2023, with cyber risks a close second
Which internal factors do you believe will present the greatest challenges for your business over the next 12 months? (Top 5 listed)
Source: 26th Annual Global CEO Survey
Which external factors do you believe will present the greatest challenges for your business over the next 12 months? (Top 5 listed)
Source: 26th Annual Global CEO Survey
Consequently, Australian businesses are investing more in upskilling, at 86% compared to 72% globally. CEOs in Australia are also more focused on decarbonisation, with 48% investing in this area compared to 31% globally.
Which of the following investments, if any, is your company making in the next 12 months?
Source: PwC's 26th Annual Global Survey
Australian businesses are slightly ahead of global peers on climate change
Companies in Australia are slightly ahead of their global counterparts when it comes to work in progress to prepare for climate risks. Significantly, 66% of companies in Australia have already or are currently developing a data-driven, enterprise-level strategy for reducing emissions and mitigating climate risks, compared to 58% globally.
Source: PwC's 26th Annual Global Survey
Transformation, disruption and long-term growth
CEOs have a burning platform for transformation
Almost one in three CEOs in Australia believe their company won’t exist 10 years from now if they continue on the same path, with disruption most likely to come from changes in regulation and ongoing skills shortages.
If your company continues running on its current path, for how long do you think your business will be economically viable?
Source: PwC's 26th Annual Global Survey
To what extent do you believe the following will impact (i.e. either decrease or increase) profitability in your industry over the next 10 years?
Source: 26th Annual Global CEO Survey
Companies can’t solve broad societal problems on their own
While CEOs are collaborating externally to help find solutions to benefit both their own company’s future growth and the well-being of society, less than half are looking - beyond a limited extent - outside of their own industry.
To what extent is your company collaborating with the following groups to address society issues?
Source: PwC's 26th Annual Global Survey
Summary - three actions for CEOs
Short-term priorities: 6-12 months
1. Mitigate against economic challenges but plan for long-term growth
With inflation and interest rates providing some challenging economic conditions, business leaders will naturally focus on protecting profit margins and delivering results in the short-term. Those who can manage this effectively can ensure their company is well positioned for investments into long-term growth and broader value creation. Australia’s economic fundamentals are still in good shape beyond 2023.
Rob Silverwood
Deals Business Leader, PwC Australia
Medium-term risk management: 1-5 years
2. Check your blind spots - what are your risk priorities?
Workforce management, technology and cyber risks continue to be key areas of risk focus. CEO Survey data indicates business leaders in Australia have a lower level of concern for risks associated with supply chain disruption and energy transition. Perceptive leaders will pay close attention to these undercurrents as they prioritise risks for their company in the short to medium term.
Corinne Best
Trust & Risk Business Leader, PwC Australia
Long-term transformation: 5-10 years
3. Take a broad approach to transformation, both inside and outside of your company
A significant number of companies have limited collaboration outside of their own industry. History shows that changes in one industry can quickly spread and competitor sets can change drastically. The best ideas might not be found in your own company. Seek out the people who are thinking ahead and develop new pipelines for talent.
Rohit Antao
Cloud & Digital Leader, PwC Australia
About the report
PwC’s 26th CEO Survey was conducted over a six-week period in October and November 2022. It received 64 responses from Chief Executive Officers (CEOs) or equivalent of 42 privately-owned and 22 publicly-owned companies in Australia across almost 20 industry sectors out of 4,410 responses globally.
Note: Percentages shown may not total 100 due to rounding.
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