Business leaders call for infrastructure investment and energy certainty ahead of May Budget

Thursday, 19 April 2018

Australian directors are calling for infrastructure to be put at the top of the priority list in next month’s Federal Budget, according to the bi-annual Director Sentiment Index released today by the Australian Institute of Company Directors.

The DSI is the only indicator measuring the opinions and future intentions of directors on a range of issues including the economy, government policy and governance regulations.

The Index shows that 42% of respondents said infrastructure investment needed to be prioritised in the May budget, ahead of controlling government debt and tax reform.

When asked to list their top 3 priorities for infrastructure investment, directors nominated renewable energy sources (50%), regional infrastructure (42%) and Telco networks (38%).

AICD Managing Director & CEO Angus Armour said the results showed that while directors were confident about Australia’s economic outlook, under-investment in infrastructure was clearly a concern.

“Not only do directors rate infrastructure as the top priority for the budget, it also remains the top priority for the government to address in the long-term, followed by the ageing population and climate change,” he said.

“Directors want a national focus on infrastructure, including a needs-based forward pipeline of projects and reforms to encourage innovative and expanded funding options. It’s notable that directors nominate renewable energy sources and regional infrastructure as the top priorities – it sends a clear message of where they believe the infrastructure investment needs to be.

“In welcome news, directors are becoming less pessimistic about the government’s impact on decision-making and consumer confidence. However this may be a reflective of the time at which the survey was in the field.

“Taken in March, the DSI reflects a period when discussion around Australia’s energy future was being elevated, and there was hope of policy certainty. This was reflected in the results, which saw concern around energy policy fall from its high watermark in last year’s Index.

“Since then we’ve seen the discussion around energy policy become more fragmented. Interestingly, only 10% of respondents rated coal as a priority for infrastructure investment, a significant drop from the last DSI.”

The report also found the nation’s business and governance leaders are more confident than ever, with overall sentiment index rising to its highest point on record.

Almost half of directors are optimistic about the general business outlook over the coming year, and 51% are optimistic about the outlook for their own sector.

AICD Chief Economist Stephen Walters said the strong optimism was being driven by directors’ confidence in the outlook for the Australian and global economies, despite geopolitical concerns.

“We can clearly see that nationally, directors are increasingly optimistic about the economic outlook, both for their own sector and the broader economy. They’re also more confident in the outlook for the US, Asian and European economies,” he said.

“However, there’s a divergence between NSW and Victorian directors and those in other states, particularly in regards to their own state economies.

“What we’re still seeing is evidence of a two-speed economy where the powerhouses of NSW and Victoria are driving the optimism in the national economy.”

Other key findings form the AICD’s Director Sentiment Index 1st Half 2018 include:

  • 44% expect to see wages growth over the coming 12 months, with 48% expecting wages to remain stable.
  • 32% expect the unemployment rate to fall over the coming 12 months, with 53% expecting it to remain stable.
  • 73% of directors rated personal tax rates as too high, while 65% said that corporate tax was too high.
  • Directors want to see action on comprehensive tax reform, with 49% nominating it as their top priority for the Federal Government in the short term.
  • In order to rebuild public trust, 46% believe improvement is required in demonstrating respect for customers, clients & communities, followed by improving corporate culture (43%), trustworthiness of leadership (41%), increased genuine stakeholder engagement (37%) and greater accountability in cases of misconduct (32%).
  • NSW directors were the most optimistic about their own state’s economic health, with 56% of respondents rating the NSW economy over the next 12 months as strong. This was the most favourable result for any state/territory economy, ahead of the ACT and Victoria (both 44%), Western Australia (19%), and Queensland and South Australia (both 17%).

To access the full report, please click here.

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