Deloitte CFO Survey Q4 2014

Media releases

Corporates taking risk-averse path as China & Canberra continue to impact confidence

Deloitte CFO Survey – Q4 2014

29 January 2015: Australian corporates appear to be caught in a crisis of confidence when it comes to the country’s business environment and their willingness to take on risk.

According to the results of Deloitte’s latest CFO Survey, covering the fourth quarter of calendar year 2014, financial market volatility, commodity prices, uncertainty over China’s economic prospects and the ongoing Budget impasse are all impacting on investment confidence and driving only modest growth ambitions, although recent falls in the value of the Australian dollar are a positive sign.

Key survey findings include:

  • Confidence – only 6% of CFOs feel confident about the financial prospects of their company
  • China – pessimism has taken hold as far as China is concerned (net -46%)
  • Canberra – Federal Government policy uncertainty, not helped by the Budget stalemates, continue to weigh heavily (net -64%)
  • The future – 85% of CFOs believe current levels of uncertainty will last at least another year

Deloitte Chief Operating Officer, Keith Skinner, said: “Risk aversion, and an overall sense of caution, across both individual companies and the wider market, appear to be taking a real hold and impacting investment appetite and growth strategies.

“For the third quarter in a row, CFO confidence in the financial prospects of their companies was well below 10%, with a shift in sentiment coinciding with the beginning of the FY15 Federal Budget impasse.

“And we appear to be caught in something of a vicious cycle, with a psychology of pessimism starting to prevail. The uncertainty in the business environment that is, and has been, a way of life for a while now, and the many global and local factors that fuel that uncertainty, appear to build on each other, dominate media cycles and seep into business’ appetite to invest and take on more risk.”

Media contact

Simon Rushton

Corporate Affairs & Communications
T: +61 2 9322 5562
M: +61 450 530 748

Compared to three months ago, how do you feel about the financial prospects of your company?

Canberra and China

While risk aversion is contributing to the overall lack of confidence, continuing signs of a weaker Chinese economy, together with the Federal Government’s ongoing fiscal repair battles, appear to be impacting CFO confidence in recent quarters, and this trend has continued.

“China’s growth outlook is, of course, relative to what we have been used to in recent years. But our increasing reliance on China as an export market means its performance inevitably weighs on CFO confidence, certainly outweighing any improvements in the US economy. CFO net optimism regarding China was -46% in Q4 2014, its lowest since Q2 2013,” Mr Skinner said.

“Unfortunately, Canberra appears to still be a lead weight on business confidence. In our Q3 2013 survey, optimism levels when it came to the Budget impasse were net -39%. They fell further in Q4, down to net -62%.

“The business community had high hopes in a change of government in terms of policy certainty, stability and Budget repair. But disappointment and frustration seem to have replaced optimism as the Budget stalemate continues. In the end, the change of government in 2013 has done little in terms of reducing uncertainty. A way out of the Budget impasse is therefore clearly important.” 

Key metrics remain stable

“Despite flat confidence levels, key business metrics as reported by CFOs are actually fairly stable, and even slightly positive,” Mr Skinner said.

“The survey results confirm that CFOs are pursuing modest, although largely organic, growth in a challenging environment but they aren't expecting to see significant improvements for some time.

“But while in a conservative position, drivers of growth – revenues, cash flows, head count, discretionary spending and capital expenditure – are in positive change or neutral territory, although increased operating costs should be an area of concern given ongoing cost and productivity challenges for many sectors.”

Is risk aversion holding business back?

Nearly 75% of CFOs surveyed felt now was not a good time to take greater risk onto their balance sheets, and over half (56%) stated their organisations were somewhat to significantly risk averse. Further, the majority (85%) expect uncertainty to prevail for at least another year (and 8% indefinitely).

“Growing risk aversion across individual companies, and across the market more broadly, is a worrying trend when it comes to investment and growth,” Mr Skinner said. “Risk aversion is an understandable response to the current environment, but attitudes towards taking on greater balance sheet risk had been on an upward trend until the second quarter of 2014.

“They are now on the decline, and this begs a number of questions. Are we stuck, or getting stuck, in a risk-averse mindset? Are we getting in our own way and holding ourselves back? And what’s needed to cause a shift?

“Business always needs to balance growth and risk, but we do appear to be struggling to find the right balance. There are positives in the current environment, such as the Australian dollar, but are we in danger of erring too far on the risk side?” 

Is this a good time to be taking greater risk onto your balance sheet?

When it comes to factors negatively impacting risk appetite, economic uncertainty (56%), government policy uncertainty (38%) and regulation (37%) lead the way.

“Given our other survey results, these are hardly surprising,” Mr Skinnner said. “Regulation is an interesting one in light of Deloitte Access Economics’ research that shows Australia is burdened by a $250 billion annual economic cost when it comes to the rules and regulations set by both governments and businesses themselves.

“Also on this list of concerns was increasing business model disruption (23%), confirming that digital disruption, and legacy business responses to it, remain a challenge and a concern.” 

Reasons to be cheerful – Australian dollar, interest rates

Mr Skinner said that, in spite of the overall sense of pessimism, there were green shoots that could drive improved sentiment, particularly the Australian dollar and low interest rates.

“Even though Australian CFOs’ overall optimism remains subdued, a key optimism driver – a lower Australian dollar – is definitely now in play and improving our trade outlook,” he said. “An exchange rate around US$0.80 is now well-established, and there is room for it to fall further, to where business generally wants to see it.”

In the Q3 2014 survey, only 2% of CFOs expected to see the value of the Australian dollar to be below US $0.80. In Q4, their expectations shifted dramatically, with 50% predicting the dollar to drop below US$0.80.

There has also been a slight shift in expectations around interest rates, including further falls. While 33% are forecasting the RBA’s official cash rate to remain at 2.50%, 42% expect it to fall – 23% to 2.25% and 15% to as low as 2.00%. 

Credit cheap as chips – but gearing remains on hold

Last quarter, CFOs reported that, in net terms, credit was cheaper and more easily available than at any time since the survey began in 2009. In Q4 2014, CFO intentions to lift gearing were at their lowest in three years (net -17%). However, more CFOs expect their own gearing to fall, as opposed to rise, in the next 12 months, the first time this has been the case since the beginning of 2013.

“There is an abundance of cheap debt available to support growth,” Mr Skinner said. “But businesses aren’t taking advantage of this due to low confidence levels. As a result, corporate Australia is under-geared and looks like remaining that way.”

About the survey: The Deloitte CFO Survey targets the CFOs of major Australian listed companies. It has been conducted on a quarterly basis since the third quarter of 2009. This survey covers the fourth quarter of 2014 and took place between 9 December 2014 and 12 January 2015. 52 CFOs participated, representing businesses with a combined market value of approximately $252 billion, or 15% of the Australian quoted equity market. 

About Deloitte

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte has in the region of 200,000 professionals, all committed to becoming the standard of excellence.

About Deloitte Australia

In Australia, the member firm is the Australian partnership of Deloitte Touche Tohmatsu. As one of Australia’s leading professional services firms, and winner of both the Australian Financial Review/CFO Audit Firm of the Year and Accounting Firm of the Year awards 2013, Deloitte Touche Tohmatsu and its affiliates provide audit, tax, consulting, and financial advisory services through approximately 6,000 people across the country. Focused on the creation of value and growth, and known as an employer of choice for innovative human resources programs, we are dedicated to helping our clients and our people excel. Formore information, please visit Deloitte’s web site at

Liability limited by a scheme approved under Professional Standards Legislation.

Member of Deloitte Touche Tohmatsu Limited
© 2015 Deloitte Touche Tohmatsu

Did you find this useful?