Gloomy view from the boardroom as recession fears rise among directors, AICD survey finds

Nearly half of Australian company directors believe we are in for a recession in the next 12 months, as confidence among business leaders plummets to its lowest since the depths of the pandemic.

The latest sentiment index from the Australian Institute of Company Directors paints a grim picture about how board members across the country felt about the State of the economy in the second half of the year.

Nearly half of the 1,309 directors surveyed between between 10 and 20 September 2024 believe Australia could be heading for a recession in the next 12 months, compared with 31 per cent that felt that way when asked the same question in the first half of the year.

Directors’ confidence in State and Federal Govenrments has also fallen.

More than half of directors believe fiscal policies have “negatively impacted their business” with trust in the Federal Government at just 26 per cent, and its perceived understanding of business at 23 per cent.

And with the exception of Western Australia and South Australia, most state governments received a negative vote of confidence from directors.

Victoria and Queensland recorded the highest proportion of directors who were of the belief the State Government doesn’t understand their business, at 74 per cent and 66 per cent respectively.

Overall, confidence among directors across all states is at its lowest since Australia was in the depths of pandemic lockdowns in 2020, down to -33.6 in AICD’s index. It’s the fifth consecutive survey where director sentiment has been in negative territory.

AICD chief economist Mark Thirlwell said there were several factors behind the glum mood among company directors.

“We’ve got economic challenges and things keeping directors awake at night . . . right at the top of all of that are domestic economic conditions (which) are very much front of mind. And within those, things like inflation, interest rates, cost of living, fairly familiar stories.

Mr Thirlwell noted that directors had been asked about the economy just after the Australian Bureau of Statistics revealed on September 4 that Australia’s GDP — excluding the pandemic — had recorded its weakest growth since 1992.

Cost of living is considered the biggest economic challenge, according to directors, followed by inflation and high interest rates, and stalled productivity growth at third.