Director Sentiment Index 1H 2026 - Directors braced for rising costs, AI risk and protracted global volatility

Australian company directors have entered the year with a heightened sense of caution as productivity pressures, rising business costs and accelerating technological change converge in the boardroom.

The AICD Director Sentiment Index (DSI) for the first half of 2026 shows that boards were already anticipating tougher economic and operating conditions even before recent geopolitical developments, including the conflict in the Middle East, added to global uncertainty.

The pressure on costs is a dominant concern. Almost nine in ten directors expect business costs to increase over the next 12 months, with implications for margins, investment and competitiveness. A quarter of directors report that global economic conditions have already curtailed investment plans, signalling a more cautious and defensive business environment.

Domestic economic conditions is the number one issue keeping directors awake at night, reinforcing concerns about Australia’s growth outlook and underlying productivity performance. This is followed by legal & regulatory compliance, and cyber crime & data security respectively.

Concern around the impact of artificial intelligence has increased dramatically over the past year and AI is increasingly shaping boardroom agendas. Almost two thirds of directors report AI tools have already delivered productivity or performance benefits, and more than four in five expect AI implementation to increase over the year ahead.

At the same time, boards are clear eyed about the risks. More than half of directors say the pace of AI adoption is faster than their organisation can keep up with.
  
AICD Managing Director and CEO Mark Rigotti says boards are navigating an increasingly complex mix of pressures.  

• 43% say productivity is the number one issue for the Federal Government to address short term; 33% housing supply & affordability; 31% taxation reform

• 73% believe a major deregulation agenda would strengthen Australia’s productivity and economic growth

• 68% of directors say regulatory and compliance requirements are limiting productivity growth in their businesses

• 52% say planning regulations should be the top focus for deregulation, followed by industrial relations (50%)

• 71% of organisations offer flexible work arrangements and plan to maintain them over the coming year

• 43% expect business conditions to weaken over the next 12 months

• 25% said the state of the global economy had led them to wind back investment plans, even before the outbreak of hostilities in the Middle East

• 41% believe current monetary policy settings could drive a significant increase in business insolvencies

• 84% believe there will be further interest rate rises in the next 6 months