Company bosses still pessimistic about economy
Australian directors are more pessimistic about business conditions now than they were two years ago, and still believe regulation and personal liability for directors is excessive.
The biggest challenges for businesses are national productivity, a lack of government investment in infrastructure – primarily roads, telecommunications, water supply and ports – and the high Australian dollar.
And the biggest hurdles to fixing these problems are general economic conditions, workplace laws, excessive regulation and skills shortages, according to a survey of 540 directors by the Australian Institute of Company Directors (AICD).
Overall, the director sentiment index now sits at just 56.3 points, compared to 93.6 points at the start of 2011. A score of 100 is "neutral", while 200 would be "optimistic".
The directors' outlook for the Australian economy is dire, with 56 expecting growth over the next year to be weak or very weak. They expect the value of the Australian dollar, the official cash rate and wages growth to decline while unemployment rises.
Their outlook on economic growth in Asia is generally good, but only 7 per cent think growth in Europe will be at least "OK".
For the first time directors were asked to name their top three impediments to productivity. The top responses were "general economic conditions", followed by "workplace laws" and "government policy". The availability of credit was of least concern.
Asked about uncertainty in federal politics, directors said they were mostly concerned that it was
making consumers pessimistic.
"Perception of the current Federal Government remains negative. Most directors maintain the belief that the current Federal Government lacks understanding of business and government performance is negatively impacting consumer confidence and business decision-making," the survey report said.
"Pessimism regarding government regulation also remains. Most directors believe that the level of red-tape and board commitment spent on regulatory compliance has increased over the last 12 months. Admin costs and time spent complying with regulations are identified by directors as having the most impact on their business, with employing workers and workplace health and safety identified as aspects of their business most affected by 'red-tape'."
However, directors are now more confident in the government's National Broadband Network than they were a year ago.
In 2011, 55 per cent disagreed the NBN was a positive thing for Australia and 10 per cent were undecided. That has now fallen to 44 per cent disagreeing and 13 per cent undecided.
Chief executive and managing director of the AICD, John Colvin, said directors' personal liability was a big concern and that Australia's laws were far too onerous compared to those of other countries.
He said there were 700 state laws making directors personally liable, even for events that occurred before they joined the board. This was affecting the culture of entrepreneurialism and risk-taking that was needed to kick-start the economy, he said.
The survey, conducted during September and the first week of October, found liability was impacting directors' willingness to join new boards, with 55 per cent claiming it had a negative impact.
"Directors are more pessimistic regarding the impact of legal judgment on director liability. More than 40 per cent of directors believe that legal judgments negatively affect their business decision-making and willingness to continue on a board, and more than half believe that legal judgments negatively affect their willingness to accept new board appointments," the survey found.