Ai Group: A cautious but hopeful year

Australian business leaders are ‘cautiously hopeful’ that 2022 will present improved business conditions although 79 per cent of CEO’s are expecting continued disruptions due to Covid, says Ai Group’s CEO survey.

The report which surveyed CEOs from 346 private sector businesses found companies expect moderate growth and an increase in employment but still anticipate the inflated costs pressures experienced in 2021.

Ai Group chief executive Innes Willox said the survey responses provided a clear indication that CEOs are expecting to face fresh disruptions this year.

“Businesses are moving to a ‘living with Covid’ footing after two years during which, as a nation, we bought time by isolating and then vaccinating ourselves.

“Business leaders expect to face additional supply chain interruptions and challenges as well as intensifying skill shortages across a wide range of occupations. In a federal election year, they will also be dealing with policy uncertainties,” Willox said.

The report highlighted five interrelated areas that CEOs are focusing on:

  1. changing inventory practices, renegotiate existing supply contracts, find alternative external suppliers, and bring supply in-house to address major supply chain issues;
  2. creating new products and services, along with improving sales of existing goods and services as well as developing online capabilities to create new domestic markets;
  3. investing in staff training and development to improve on skill shortages;
  4. develop new technologies which focus on information and communication; and
  5. increase investments in physical capital.

Willox added that the strategies are critical for an improved business outlook.

“However, in view of the magnitude of the longer-term challenges – in particular, the well-entrenched deficiencies in productivity growth and business investment, it is clear that much needs to be done.

“In a federal election year, it is timely to point to the importance of our political leaders giving these underlying challenges the attention they deserve,” he said.

Business expectations for 2022

Supply chain issues continue to play a pivotal role in business disruptions, with only 17 per cent of CEOs expecting improvements compared to 2021 and 31 per cent anticipating no changes at all.

Nearly 50 per cent of CEOs said Covid remains as the main preventer of business growth regardless of high vaccination rates and indicates the need for continued adaption to the Covid environment.

The cost pressures that were brought during 2021 are expected to remain, with 79 per cent of CEOs suggesting higher input prices this year and only one per cent anticipate it to subside.

“These expectations and their expectations of being able to pass some of these higher costs on to customers, puts business leaders at odds with the relatively benign inflation outlook anticipated by the official economic agencies. The inflation outlook is clearly a key area to watch over coming months,” said Willox.

About 73 per cent of CEOs believe finding and retaining skilled staff will be one of the major difficulties this year and rank the issue as the third most common preventor of growth. The amount of business leaders expecting to increase their workforce are two and a half times greater than those expecting employee numbers to reduce.

Although business leaders are expecting disruptions from 2021 to carry over throughout this year, the majority are carrying ‘measured hopefulness’.

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