Economic uncertainty and governance issues are weighing heavily in the first half of 2024 | Director Sentiment Index 1H 2024

The perception of business conditions nationally, and across all states and sectors has continued to decline, and director sentiment about the current state of the economy is subdued.

The DSI has remained in negative territory for the fourth consecutive survey, with a slight improvement of 0.5 to -19.2, up from -19.7 in the second half of 2023.

Cost of living pressures are factoring strongly and have surpassed labour shortages as the number one economic challenge facing Australian businesses, according to the latest Director Sentiment survey. Productivity growth, inflation and interest rates are rated the next biggest challenges.

While current economic conditions have softened, directors are cautiously optimistic about the outlook. Expectations for future conditions have lifted slightly and more directors think the chances of Australia falling into recession over the next year are less likely.

Tight monetary policy continues to hurt with 41 per cent of directors saying that current interest rate settings are negatively impacting their businesses and the economy.

AICD Managing Director and CEO Mark Rigotti said the message coming from directors is that we’re not out of the woods yet. It’s been a difficult period to navigate and the way forward from here is not instantly clear.

“Directors are also feeling the weight of regulation and uncertainty around non-financial considerations such as cyber security, AI governance and the introduction of the government’s mandatory climate reporting regime.”

Key findings include:

• 57% say compliance & regulation is the main factor affecting their board’s risk appetite
• 69% say their board has effective oversight of cyber security threats
• 43% say they’re not confident their organisation has appropriate governance settings to manage AI opportunities and risks
• 31% say their main concern with mandatory climate disclosures is the complexity of reporting requirements
• Housing affordability/supply is rated the top short-term policy priority (35%) for the Australian Government to address
• 58% say they want more spending on education and training