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Australian CFOs prepare to shift gears


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29 January 2013: A third of Chief Financial Officers (CFOs) are more optimistic compared to last quarter according to the latest Deloitte Quarterly CFO Survey. Reduced interest rates, stronger growth in China and the increased price of iron ore have all combined to improve the outlook amongst the 73 ASX300 CFOs who took part in the research.

Deloitte’s Chief Operating Officer, Keith Skinner, “It seems most ASX300 CFOs have right sized their businesses, cleaned up their balance sheets and are adjusting to the new norm of a stronger Australian dollar (A$).”

“A solid 70% of CFOs expect to see positive revenue growth in the coming year and 63% expect an increase in cash-flow over the same period. These two key indicators have been steadily increasing over the past two quarters.”

“As the spike in heavy mining investment fades and the sector turns to the less capital intensive output phase, there will be more opportunities for the other 80% of the economy to take a greater share of investment dollars,” Mr Skinner said.

“This will improve the terms of trade and push the A$ back towards parity. In the next couple of quarters we predict a shifting of gears amongst Australia’s non-mining trade exposed businesses,” continued Mr Skinner. “We expect CFOs to move from the current holding pattern and adopt more proactive growth strategies. These might include increased capital expenditure and greater investment in business development activity.”

Boosted by falling interest rates

With two cuts to the official cash rate in the fourth quarter, over half (56%) of the respondents identified falling interest rates as having a positive impact on their levels of optimism. This also enhanced the attractiveness of bank borrowing, with 23% of CFOs saying that the cost of credit was cheap or very cheap. Almost two thirds (63%) of respondents expect the RBAs official cash rate to continue to fall below the current rate.

Hung up on politics

Mr Skinner said, “Lack of policy certainty continues to be a significant negative impact on the confidence levels of the majority (71%) of CFOs this quarter. For the vast majority of CFOs the forthcoming election cannot come soon enough, they continue to be frustrated by the policy intransience of a hung parliament.”

Productivity

Although 79% of CFOs have some sort of productivity measure in place, around one in five (21%) of them fail to track this key efficiency and competitiveness indicator. When it comes to improving productivity the most popular areas of focus for CFOs was to increase their revenue from existing customers (85%), move into new markets or acquire new customers (75%), and invest in training and development of employees (72%).

Other key findings

  • China - As Chinese economic growth starts to strengthen the percentage of CFOs who said their optimism was impacted by a Chinese slow down fell from 73% to 53% this quarter
  • A$ - The continued high value of the Australian dollar negatively impacted the confidence of 62% up from 45% last quarter
  • Interest rates - 56% of CFOs felt the positive effects of further reductions to interest rates on their optimism levels
  • Revenue – Six months ago half (51%) of CFOs expected positive revenue growth, this quarter there are 70% who believe their businesses revenue is going to improve
  • Cash flow - Operating cash flow was also expected to improve for 63% of respondents (56% in Q3, 29% in Q2) as CFOs continue to squeeze out incremental growth
  • Growth - Organic expansion (70%) and investing in new products, services and markets (56%) were the most popular growth strategies
  • Credit - Cost of credit continued to fall, the result of falling interest rates, to the lowest level since the survey began in 2009, with 23% describing credit as cheap or very cheap. The availability of credit has jumped with 60% reporting it as somewhat or very available and only 15% finding it hard to get
  • Recruitment – Approximately 30% of CFOs expected headcount to increase, offset however by a similar percentage who expect headcount to decrease

The survey was carried out between 11 December 2012 and 14 January 2013

NB: See our media releases and research at www.deloitte.com.au

Follow us – @DeloitteNewsAU

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Contacts

Name:
Johnny Sollitt-Davis
Company:
Deloitte Australia
Job Title:
Corporate Affairs & Communications
Phone:
Tel: +61 2 9322 7256, Mobile: 0431 134 850
Email
jsollittdavis@deloitte.com.au
Name:
Keith Skinner
Company:
Deloitte Australia
Job Title:
Chief Operating Officer
Phone:
Tel: +61 2 9322 7580
Email
kskinner@deloitte.com.au

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