Business leaders in Australia and throughout the world expect a short and moderate global recession in the next 6-12 months.
Still, a vast majority predict growth will resume within a three-year timeframe, According to KPMG International’s annual CEO survey. The survey found that the projected downturn will make it more difficult to recover from pandemic-related disruption and impede anticipated growth. Earnings could be reduced by 10% or more.
A substantial majority of respondents in Australia (78 per cent) and abroad (75 per cent) indicated they had taken actions to prepare for a downturn, such as adopting or preparing a hiring freeze. Most (64 per cent in Australia, 77 per cent globally) were considering decreasing their employees. In comparison, more than 80 per cent in Australia and abroad planned to boost their prices to meet expenditures during the following six months.
When asked about the most pressing issue confronting them, Australian CEOs ranked continuous commodity fatigue and ongoing constraints first (18%), followed by economic, supply chain, and reputational issues (all 16 per cent). Over the next three years, the main threat to growth will be operational challenges and developing disruptive technologies, accounting for 14% of the total.
Aside from economic issues, three-quarters (75 per cent) of Australian CEOs, a higher proportion than their global counterparts, said they were already seeing demand for increased reporting and transparency on ESG issues from stakeholders, including investors, regulators, employees and customers. And 78 per cent believed stakeholder scrutiny in this area would accelerate over the next three years.
Over half of Australian leaders admitted to being unable to communicate their ESG performance to stakeholders properly. One important factor could be that only 28% (45 percent globally) of respondents thought their ESG strategies were now improving financial performance. According to the report, Australian CEOs are ahead of the global pack in terms of company purpose, inclusion and diversity thinking, and the benefits of gender equity.
The issues of Inclusion, diversity & equity (IDE) and gender equity also found resonance locally. More Australian leaders (76 per cent) than global (68 per cent) believed IDE had moved too slowly in the business world. At the same time, a higher proportion argued that more gender equity in their C-suite would help achieve the company’s growth ambitions.
Digital transformation was another key issue. A large majority (88 per cent Australian,72 per cent global) said they had an aggressive digital investment agenda designed to get the first-mover advantage. Still, the same percentage of respondents also warned that they had to address burnout from accelerated digital transformation over the last two years before continuing their transformation journeys.
Andrew Yates, KPMG Australia CEO, said: “With a global pandemic, the war in Ukraine and growing economic uncertainty, it is not surprising that CEOs’ normal optimism has taken a bit of a hit. This has been a period of turbulence, and a mild recession is certainly a plausible scenario for the world economy.
“But it is encouraging to see that over the three-year horizon, leaders are more confident of a rebound of growth both in the global economy and their own companies.
“Australia is better placed than most countries, and so the probability of a recession here is lower than elsewhere, but there is still a risk that domestic demand contracts rather than just grow at a slower pace. We still must see how households respond to the high inflation and interest rate environment.
“So far, they have held up better than consumers in other countries, but the full impact of higher mortgage costs has yet to be felt. The extent to which businesses follow through with their capital expenditure plans and the return of international students and tourists will also be important factors in boosting economic growth.”