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Australian CFO optimism is prevailing once again despite the heavy toll of lockdown restrictions. In the latest edition of Deloitte’s biannual CFO Sentiment, confidence was up nine percentage points from six months earlier with 84% of CFOs feeling optimistic or highly optimistic about the financial prospects of their company.
With the survey being conducted during the July Sydney and Melbourne lockdowns, the dangers of the Delta variant were already front of mind for CFOs. Though this optimism may come as a surprise to some given the lockdowns, it is clear that CFOs and their businesses are adapting to a new pandemic normal in Australia. Experience from operating in a pandemic-stricken world in 2020 and the knowledge that Australia can recover from COVID impacts has translated into far less pessimism in the face of these latest pandemic challenges.
This new COVID normal can be seen in Chart 1, where uncertainty levels (though still high) have fallen since June 2020. Though 17% of CFOs rate the current environment as having high or very high levels of uncertainty, this has fallen over time, with a higher percentage of respondents now rating uncertainty levels as normal – 22% now compared to 13% in December 2020 and 8% in June 2020.
Chart 1: How would you rate the general level of external, financial, and economic uncertainity facing your company?
CFOs have taken comfort in the resilience of the Australian economy and the strong economic momentum from early 2021, with 72% of CFOs reporting the Australian economy has had a positive impact on their level of optimism. Fiscal and monetary policy settings have also helped, with low interest rates a large positive impact on optimism levels for 46% of CFOs. Unsurprisingly, the largest negative impact on optimism by far remains with pandemic uncertainty.
As CFOs continue to acclimatise to the new COVID normal, their attention is turning from external risks to internal ones. Internally driven risks such as securing and retaining key talent, an inability to execute strategies and technology implementation have now moved up into top spots of risks concerning CFOs, overtaking previously dominant (but still present) external risks such as the global pandemic.
And with the growing prominence of internal risks, the future of work has become a major consideration for businesses. Workplaces have changed dramatically since COVID disrupted where, when and how businesses work. More than a third (38%) of CFOs have already launched a new or refreshed policy on ways of working, with another 15% working towards launching a new policy. The most significant modification to ways of working has been where people are working, with 47% of CFOs reporting large changes. There have been smaller changes to when and how businesses are working.
Chart 2: If your new ways of working position changed, what have you modified?
With restrictions in Australia changing by the day, there will be continued pandemic and economic uncertainty for a while. The toll of these latest lockdowns will be hard in the short-term, though Australia has shown that a large bounce-back is more than possible.
But in the face of it all, Australian CFOs remain steadfast: hard-earned experience from 2020 lockdowns, and the subsequent rapid economic recovery, has armed them with the knowledge to overcome continued uncertainty.
For more on CFO Sentiment, including insights on ESG and cloud transformation, see the full publication here.
David is a macro economist with extensive experience in applied economic and quantitative analysis of the Australian economy, along with considerable experience in labor market analysis. David is a regular commentator on macroeconomic trends, and prepares a weekly economic briefing newsletter.
Michelle is a graduate economist working in Deloitte Access Economics’ Macroeconomic Policy & Forecasting team. Michelle completed a Bachelor of Laws (Hons) & Bachelor of Commerce from Monash University and is interested in trade economics, competition and public policy.