CFO sentiment: Emerging from the storm
Conditions may be weak in the here and now, but Australian CFOs are feeling more optimistic about the future
The Reserve Bank of Australia maintained the cash rate at its current level today. This decision comes amidst a shift in CFO optimism, as highlighted in Deloitte’s latest CFO Sentiment report.
Australian CFOs’ net optimism about their own business prospects has lifted by 29 percentage points to 56% over the past six months – the first notable rise since late 2021. This marks an important turning point for businesses. Net optimism about the economy (-7%) is notably weaker than optimism about own business prospects (+56%), but has noticeably increased over the past six months as CFOs adjust to the uncertain economic environment.
CFOs have long been grappling with talent shortages, inflation, interest rate rises, and weak demand. However, they are now beginning to shift their appetite for risk. Approximately 23% of CFOs believe it is a good time to take on risk, up from a record low of 14% six months ago. Although this remains low by historic standards, it provides an indication that CFOs are feeling more upbeat about the year ahead.
Chart 1: CFO Optimism about Company and Economy
Source: Deloitte CFO Sentiment Survey
CFOs are split on the outlook for interest rates despite their concerns about inflation and interest rates decreasing over the last six months. Almost half (48%) of CFOs expect rates to be much the same in 12 months’ time, while 45% expect them to be lower. This uncertainty is fueling some of the biggest concerns for CFOs, such as Australia experiencing an ongoing economic downturn or CFOs facing challenges in executing strategies over the next year.
Most organisations and CFOs are balancing the desire for cost control (in a difficult business environment) against the need to drive longer term growth with a focus on productivity. CFOs are concentrating on improving and automating processes, supported by the transformative abilities of generative AI (Gen AI).
Gen AI is revolutionising the workplace, and CFOs are taking notice. In just six months, CFOs have become far more bullish about its potential impact, with the share of CFOs who believe Gen AI will substantially transform their industry within 5 years rising from 57% to 78%. Nevertheless, businesses still face challenges, with significant improvements in implementation and data quality needed to fully harness Gen AI’s power.
Looking ahead, CFOs will continue to carefully balance their business decisions against lingering uncertainty. However, the scales are starting to tip towards recovery. As economic conditions slowly improve, it’s more important than ever that CFOs focus on innovation and growth to make the most of their opportunities.
This newsletter was distributed on 6th August 2024. For any questions/comments on this week's newsletter, please contact our authors:
This blog was co-authored by Jasper Roberts, Graduate Economist at Deloitte Access Economics
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