A deteriorating global economy is hurting sentiment among Australian financial executives, bringing optimism to the lowest levels since 2009, a new survey shows.
A poll of Chief Financial Officers (CFOs) from major ASX-listed companies conducted by Deloitte, showed only 16 percent of CFOs were more optimistic about their companies’ financial prospects in the second quarter, compared to 38 percent in the first quarter; 21 percent reported rising pessimism, versus just 13 percent in the previous three months.
The survey cited Europe’s sovereign debt issues, the slowdown in China and policy uncertainty in Australia as factors weighing on confidence.
“The issues that have been around – the carbon tax, mining resources tax and the hung parliament where no major parties have absolute control – all of those things are causing nervousness about making longer-term investment decisions,” Keith Skinner, Chief Operating Officer at Deloitte, told CNBC.
Only one quarter of the respondents, comprised of 80 CFOs spanning a wide range of industries from mining to retail, say they plan to increase their capital investment spend in the coming year.
Mining companies, for example, have already been scaling back their investments this year. BHP announced in May that it is cutting back on its $80 billion expansion plan due to easing commodity prices.
“Capital expenditure, largely across the resources sector, drove most of the growth in Australia’s economy during 2011-12. If the downward trend in this area continues, it could be a real concern for our growth prospects going forward,” Skinner said.
Uncertainty amongst the CFOs is also reflected in their forecasts for the Australian dollar and the country’s monetary policy. More than two-thirds expect the Aussie to fall below parity within 12 months, compared to 11 percent in the same period last year.
Meanwhile, more than half forecast the Reserve Bank of Australia (RBA) will cut interest rates to between 3 and 3.25 percent within the next year. The official cash rate currently stands at 3.5 percent following two rate cuts in May and June which totaled 75 basis points.
By CNBC’s Ansuya Harjani