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Deloitte’s most recent quarterly survey of chief financial officers from listed Australian companies has revealed a marked increase in confidence, with 36 per cent of CFOs feeling more optimistic than they did three months ago.
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CFO optimism up one third in two months: Deloitte
22 April 2014
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Keith Skinner, Deloitte’s chief operating officer, said a number of factors are contributing to this heightened level of optimism, including improved confidence in the Australian economy.
“Many of the external issues that may have previously dampened their outlook are fading, with concerns about domestic and international economic uncertainty falling away to their lowest level in almost three years,” he said.
“Looking at their own businesses, there is an overwhelming expectation amongst CFOs that they will enjoy revenue growth (82 per cent) and operating cash flow will improve for a significant majority (68 per cent) too,” added Mr Skinner.
He said the jump in optimism is very significant and could have real impacts on future investment trends.
More than half (55 per cent) of CFOs said that now is the right time to take more risks on their balance sheets, up from 44 per cent in the previous quarter.
“For the first time in three years, the majority of chief financial officers are prepared to increase the level of risk on their balance sheets. Now the big question is whether this appetite for risk translates into increased business investment this year?” said Mr Skinner.
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While credit in Australia remains cheap and readily available, a majority of CFOs (64 per cent) said they prefer to use their own cash reserves to fund growth rather than bank borrowings (63 per cent) or issue more equity (18 per cent).
When asked about the key levers for achieving sustained growth for their company, 61 per cent of Australian CFOs identified improved productivity as their top priority, followed by investing in technology and product development (55 per cent) and reducing input costs such as wages (39 per cent).
“The top three growth levers for CFOs are those they can control and relate to improving productivity and driving down inefficiencies in one way or another,” said Mr Skinner.
“In the next 12 months, the most popular type of growth remains organic expansion (76 per cent) followed by introducing new products, services and expanding into new markets (63 per cent). Plans to undertake more M&A activity (54 per cent) remain the third most popular option with CFOs,” he added.
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