Sentiment has plummeted to its lowest level since the inception of the survey in 2011, with only two per cent of directors expecting the Australian economy to be strong in the coming year.
More than 1,000 directors were surveyed for the DSI (compiled by Ipsos) in mid-March, at a time when many businesses across Australia began shutting their doors and COVID-19 cases were starting to climb.
Since the last survey in October, director sentiment has fallen more than 38 points to minus 59.6. For context, director sentiment fell about four points between the previous two DSIs.
The AICD’s Chief Economist, Mark Thirlwell, said, “It’s important to note that our survey closed on 22 March, the day the government announced its second stimulus and well before the huge JobKeeper package was deployed. That was also before tens of thousands of Australians had been stood down.
“We’ve already seen policymakers deliver some radical measures to help keep the economy alive during the opening weeks of the current public health crisis, along with a range of creative initiatives from businesses and NGOs. As the economic and financial fallout continues over the coming months, further innovative and decisive steps by governments and businesses will be needed.”
Unsurprisingly, COVID-19 comfortably eclipsed climate change and China’s outlook as an economic issue, with nearly nine in ten directors surveyed identifying it as the main economic challenge currently facing Australian business.
Global economic uncertainty was also mentioned significantly more often by directors in the current survey when compared to the second half of 2019.
The DSI revealed:
- Only two per cent of directors expect the Australian economy to be strong over the coming year with 85 per cent expecting it to be weak.
- 59 per cent directors are expecting their business to weaken in the coming year, up from 20 per cent from the second half of 2019.
- 73 per cent of directors indicated that they are pessimistic about the general business outlook (up from 27 per cent) and 54 per cent are pessimistic about the business outlook for their own sectors (up from 24 per cent).
- Three in five directors expect staffing levels/labour demand and investment levels to decrease over the coming year.
“The government’s strategy of putting the economy into hibernation is intended to reduce the costs of shuttered businesses and lost jobs which, as well as inflicting severe short-term pain, would also wreak lasting, long-term damage on our economy and society. By seeking to mitigate these costs by as much as possible, the plan is to place us in a much better state for when the COVID-19 crisis has past,” Mr Thirlwell said.
“When we do begin to see a thaw, the policy focus will need to shift from keeping our economy on life support to full-scale rehabilitation and recovery.
“Directors’ messages in the DSI about what they see as the longer-term policy priorities for Australia could then serve as an important input into the new set of measures that Canberra will then have to deploy.”
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