Results from the latest Director Sentiment Index (DSI) have been released, with directors calling on the Turnbull Government to act quickly on infrastructure and tax reform.
Results from the latest Director Sentiment Index (DSI) have been released, with directors calling on the Turnbull Government to act quickly and address crucial issues to offset concerns that global economic uncertainty will weigh on local business.
The research findings, released today by the Australian Institute of Company Directors (AICD), show that while sentiment has risen to its highest level in two years, confidence in the Australian and global economies is still low. Sixty per cent of directors still perceive the economy as weak at present and almost 50 per cent expect it to be weak in the next 12 months.
Infrastructure and transport, a comprehensive tax reform package, and national industry and innovation policy are listed as the Government's main priorities and the key priorities to encourage innovation and growth in Australia's transitioning economy.
"Directors are increasingly concerned about our international competitiveness and engagement with Asia," said John Brogden, Managing Director and Chief Executive Officer of the AICD. "These are important issues that will impact the nation's future and are additional evidence that Australia needs a bold new policy framework and commitment to innovation if its past prosperity is to be maintained."
Increasing investment in infrastructure is critical for the growth of industries into the future. However, almost 90 per cent of directors maintain that government spending on infrastructure is too low.
Top economic challenges include global economic uncertainty and low productivity growth, with the "ineffective taxation system" regarded as the third most important challenge.
What does the DSI say?
Economic and market outlook
- Directors have become more optimistic about the future health of the Australian economy, however half still remain pessimistic.
- Sentiment regarding the US and Asian economies has declined since the first half of 2015, while the European economy continues to be regarded pessimistically.
65 per cent of directors still expect the exchange rate to decline in the next 12 months and nearly half of directors expect the unemployment rate to increase.
- Directors' optimism regarding the general business outlook and the business outlook for their sector reached the highest levels since first half 2014.
- About 35 per cent of directors claim the growth of their business has weakened in the last six months, while expectations for growth are increasingly optimistic.
- GST remains the top priority for tax reform, with 82 per cent wanting changes to the current rate and/or base. This is followed by multinational tax arrangements and state-based taxes.
- Directors have become more optimistic regarding the current level of 'red-tape', with almost 35 per cent perceiving a decrease in the last 12 months, and almost 25 per cent expecting a further decrease in the next 12 months.
- 76 per cent of directors believe the Federal Government should pursue industrial relations reform either in this term or following an electoral mandate.
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