CFOs adopt positive economic perspective: Deloitte survey

The nation's chief financial officers have said the Australian economy is on track for a positive upturn.

This comes after the release of Deloitte’s biannual CFO Sentiment survey which showed increased collective confidence lifting at its fastest rate for the first time in three years.

This rise in optimism is based on growing expectations of revenue and profit growth.

The CFO Sentiment survey highlighted CFO confidence in the financial prospects of their companies, which has surged by 29 percentage points to 56 per cent over the past six months.

Despite the upsurge in confidence, Deloitte said the majority of CFOs “remain uncertain” of the Reserve Bank’s interest rate intentions as half believe it will be lower in a year.

Deloitte partner and CFO program leader, Stephen Gustafson, said the survey reflects CFOs' changing perspectives on economic uncertainty and the upward slope of risk tolerance.

“After two years of talent shortages, inflation, interest rate rises and difficult business decisions, the tide is starting to turn,” he said.

“More familiar than ever with tougher economic conditions, our CFOs are more resilient as a result.”

Gustafson said familiarity has grown among the CFOs in terms of the economy’s current conditions, with a much smaller proportion having adopted a pessimistic attitude.

“This familiarity with the economic environment has seen CFOs optimism grow, with almost two-thirds optimistic about the financial prospects for their companies compared to less than half six months ago,” Gustafson said.

“Similarly, only 10 per cent are pessimistic now compared to 20 per cent six months ago.”

The survey results show business performance expectations have risen, with 73 per cent of CFOs expecting revenue to increase in the next year compared to 60 per cent six months ago, Gustafson added.

It was also found that 41 per cent of CFOs expect an increase in profit margins, a 29 per cent increase in the last six months.

Sixty-seven per cent said controlling costs was the top priority for the year, ahead of revenue growth.

Forty-three per cent of CFOs said productivity is in their top three priorities, which came in above other focus areas such as core business (29 per cent), increasing cash flow (29 per cent), and expanding by acquisition (43 per cent).

Seventy per cent believe economic downturn will be the biggest risk, followed by talent attraction and retention (52 per cent) as well as inflation (51 per cent).

The results reflected that 69 per cent of CFOs are looking to decrease or maintain capital expenditure, while 33 per cent of CFOs are either reducing headcount or have already done so.

This is due to reducing third-party spending being the biggest sole cost control measure.

Deloitte access economics partner David Rumbens said the survey results are a clear indicator of the improving confidence among CFOs.

“This latest survey shows improving confidence among CFOs which signals a potential inflection point for business as they look ahead to recovery, rather than focusing on the current economic uncertainty,” he said.

Rumbens said Deloitte access economics has made clear an increase in business confidence is crucial to economic growth.

“Key upcoming economic data releases like the CPI and labour force data may influence the decisions of policymakers, as well as the sentiment of business leaders on the economy’s performance.”

CFOs becoming bullish on the potential of generative AI was also reflected in the survey results.

It was demonstrated that CFOs are increasingly likely to see the potential inherent in generative AI, with 78 per cent expecting it to cause substantial industry transformation in the next one to five years. This is a 57 per cent increase from six months ago.

Gustafson said businesses still need to get the foundational elements right to make the most of innovative tools such as generative AI but strongly believe in the promise of benefits.

“The number of CFOs with no plans to implement AI has halved in the last six months, indicating a growing acceptance of the technology and a willingness to explore its potential benefits,” he said.

Rumbens said that as the current economic market begins to improve, CFOs must “prioritise innovation and growth to capitalise on emerging opportunities.”

“As the broader economic landscape becomes clearer, it is crucial for CFOs to be strategically positioned to make the most of the recovery,” Rumbens said.

“While the immediate environment remains challenging, the outlook for the coming year is looking increasingly optimistic.”