Has the economy turned the corner?
Australian chief executives believe it might just have, driving a business confidence index to a three-year high and bringing it in line with global levels.
The Young Presidents’ Organisation – a New York-headquartered group formed in 1950 and including nearly 20,000 key global executives – said its Global Pulse Confidence Index for the Australasia region (Australia and New Zealand) surged in the third quarter, after two straight declining quarters. The index rose 6.2 points to 63.3, reflecting a higher level of optimism than the rest of Asia for the first time in the history of the four-year survey.
Where is this optimism coming from?
Polls changed sentiment, perceptions
The change in government is, perhaps, the biggest factor that has changed sentiments and perceptions, but lower interest rates and the recent fall of the Australian dollar, making the nation’s exports more competitive, have played a part, according to the survey.
Tudor Marsden-Huggins, managing director of Employment Office Pty Ltd and an executive member of the YPO Queensland chapter, believes the new government will help growth in non-mining investment in the region, a key requirement for growth in the new economy.
Still, “it will be interesting to see over the coming months if this surge in CEO optimism is maintained, particularly as the new government’s honeymoon period comes to a close,” he said. “International events will also play a role, such as the government shutdown in the United States.”
Truly, global confidence has returned, too. In fact, overall confidence levels across different regions continued to converge, with less than a point now separating Asia and the European Union, compared with a difference of 12.8 points six months ago, the survey pointed out. Only the United States declined in confidence, perhaps because of political brinkmanship that led to an ill-fated government shutdown. In fact, shutdown coincided with the period of this electronic survey. Consequently, the United States is still stuck in a tight three-point range it has held since July 2012.
The confidence in Australia is reflected in the broader outlook as well as specific hiring and investment plans.
More than two-thirds (71%) of the CEOs surveyed expect turnover to increase by at least 10% over the next 12 months, leading to more jobs and investment. Both the turnover and hiring indices clocked their highest readings in the survey’s brief history, while the fixed investment index reached its highest point in 15 months.
The CEOs expect the good times to continue. Nearly half of the CEOs surveyed (46%) said their outlook for the next six months was optimistic: 44% expect conditions to improve even further – twice as many as in the last quarter.