Sentiment falls further

Declining confidence in business and regulatory conditions continues to worry directors of Australian companies, not-for-profit organisations and public sector bodies, according to the ninth Australian Institute of Company Directors’ (AICD’s) Director Sentiment Index (DSI).

Overall sentiment of directors has slipped 2.4 points to negative 31.4 so far in 2015, principally as a result of faltering confidence in business and regulatory conditions.

The bi-annual DSI, which is the only indicator measuring the sentiment and intentions of directors across all sectors of Australian business, found that almost 70 per cent of directors expect the health of the domestic economy to be weak in the next 12 months, with low productivity growth and consumer confidence continuing to be the economic key challenges facing business in Australia.

In addition to economic and business indicators such as exchange rates, interest rates, wages and unemployment, the DSI gauges general feeling towards broader issues such as the need for tax reform and budget priorities for the Federal Government.

In the latest DSI, members ranked infrastructure as the first priority for the short term, but interestingly taxation reform rose through the ranks and is now the second greatest priority for directors. Combine this with the findings that 78 per cent of members support a change to the GST system and it would seem clear where members would like the Federal Government to start implementing change.

However, 84 per cent of members feel the quality of policy debate is poor, and that the balance of power issues within the Senate rates as the third highest economic challenge facing business. Together, this makes it clear that the Government faces great difficulty in resolving the issues facing business and delivering a real reform agenda.

Announcing the results of the DSI, John Brogden, managing director and CEO of the AICD said: “The results are a telling indication of the desire for change as our members come from all parts of the community, not just business.”

Speaking specifically about the calls for GST reform, Brogden added: “We implore the government not to ignore the need for GST reform and we implore the opposition not to take a short-term view on this. It's certainly not a silver bullet but we need to finish the work we started 13 years ago," he said.

Dr Eileen Doyle, director at Boral and deputy chairman of CSIRO echoed Brogden’s views by stating that the government should look at tax avoidance by multinational companies as a key priority of taxation reform otherwise local companies may be at a competitive disadvantage. "You want to be able to compete," Doyle said.

Doyle added that the DSI highlighted the fact that “we are clearly facing a worse economic climate in the next 10 years than we have faced in the last 10 years.”

She further commented that business must not give up when faced with these challenges but rather learn to adapt. She suggested organisations look to some examples where difficult circumstances have been faced before, such as the Hunter Valley region in NSW which on a smaller scale some years ago, faced many of the issues currently facing the country.