CFOs remain cautious despite newly gained confidence: survey
The confidence of Australia’s chief financial officers regarding business prospects and the economy has shifted positively, Deloitte has revealed.
The most recent version of the big four firm’s CFO Sentiment survey revealed that Australian chief financial officers (CFOs) have begun to feel more positive about their role and line of work, resulting in increased confidence.
Despite the uptick in confidence, Deloitte revealed that CFOs remained cautiously guarded against economic shocks due to concerns shifting towards executing strategy, retaining talent and the implications of the upcoming federal election.
The survey reflected a 12-percentage point surge over the last six months in CFO net optimism towards the economy, the first positive reading since the end of 2022.
Net optimism about business prospects also lifted by 9 percentage points to reach 65 per cent, a figure that had not been seen in about two years.
Deloitte partner and CFO program leader Stephen Gustafson said though the results were encouraging, CFOs weren’t out of the woods yet.
“Six months ago, our mid-year survey of Australian CFOs showed a notable rise in business optimism for the first time in three years and a sharp reduction in economic pessimism. Now our latest survey reveals CFO sentiment has continued its recovery,” he said.
“Risk appetite is increasing but remains historically low, and though net sentiment about the economy has improved, 68 per cent of CFOs feel neutral towards it.”
“This suggests that while CFOs are cautiously optimistic, good times are far from guaranteed. CFOs have recent, first-hand experience of how quickly economic conditions can change, and a range of uncertainties still weigh heavily on the year ahead.”
The survey, conducted last month highlighted the threat of an economic downturn had dropped down the list of concerns from first to fifth as it was replaced by fears of being able to execute deals.
Retaining key talent was second highest on the concern list, while risks surrounding changes in regulations or government policies were third.
Deloitte Access Economics partner David Rumbens said the shifting of CFO concerns aligned with their improved sentiments towards business prospects.
“The economic outlook is better for the year ahead, particularly once inflation eases a little further to allow for rate cuts and spark stronger consumer spending and business investment,” Rumbens said.
“Australian CFOs clearly sense we’re switching to a recovery phase, so their focus is shifting inward, with the inability to execute strategies and securing and retaining key talent now top of mind.”
The survey also captured CFO sentiments towards upcoming environmental, social and governance (ESG) factors on 1 January 2025.
Thirty-five per cent of CFOs said they saw the value of mandatory sustainability reporting as an important tool for effective stakeholder communication; however, 23 per cent said they were only focused on basic compliance at minimal cost.
CFOs were also becoming more optimistic about and confident towards AI developments, but there was a remaining gap between aspiration and adoption.
Rumbens said CFOs could expect better times ahead yet many of the risks they were currently grappling with wouldn't disappear overnight and would weigh heavily on decision making.
“A key risk to the outlook is the trajectory of inflation in 2025. While inflation is steadily tracking down from pandemic highs, underlying inflation will be more difficult to tame. CFOs recognise the risk, with 65 per cent of CFOs expecting inflation at the end of 2025 to still be between 3-4 per cent, above the RBAs target band.”
“Two new factors may make the inflation problem even more complex: a change of government in the US particularly with different policies around trade and the upcoming Australian federal election.’
“CFOs will no doubt watch these developments closely.”
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