Improved economy not a guarantee of business success

While Australia's chief financial officers are confident the economy has passed its low point, this doesn't necessarily stretch to their own business performance over the next 12 months.

Deloitte's biannual CFO Sentiment report gathers responses from more than 60 chief financial officers across Australia, with the latest findings representing the highest level of optimism in the Australian economy since the end of 2022.

Simultaneously, net optimism about business prospect has plunged 16% since the end of 2024 as uncertainty surges to 92% - the highest level over the past two years.

More are expecting employment and profit margins to decrease over the next year and have rising concerns about competition, pricing and costs, Deloitte said.

Commenting, Deloitte partner and chief financial officer program leader Stephen Gustafson said global volatility, particularly US policies, are not the only focus for domestic economy and businesses.

"However, tariffs are not the whole story. While 84% of chief financial officers believe they will negatively impact the Australian economy, only 64% believe they will impact their own business, with most adopting a wait-and-see approach towards a formal tariff response," Gustafson said.

"Internal challenges are also dragging down business optimism. Alongside margin and profit fears, an inability to execute strategies remains the top issue, with 62% identifying this as a significant risk.

"Meanwhile, technology implementation and digital disruption (48%) is a growing concern for chief financial officers."

Deloitte Access Economics partner David Rumbens highlighted the condition of the economy has little to do with the pressures businesses are facing.

"While the worst of the cost-of-living crisis and associated economic slowdown appears to be over, economic growth remains sluggish and is still going backwards on a per-capita basis," Rumbens said.

"This has implications for household spending, which remains subdued and is contributing to expectations of lower margins and profits for businesses.

"However, there are green shoots - we are firmly within a rate-cutting cycle, inflation appears to be under control, the labour market is relatively resilient, and the results of the recent federal election provide for policy certainty, which should help chief financial officers forward plan investment and could help lift business sentiment in the coming months."

Looking ahead Rumbens said optimism throughout 2024 suggested that chief financial officers were expecting a stronger year in 2025, but the upbeat sentiment has since been "dialled back".

"While confidence in the broader economy continues to grow, chief financial officers are now less assured about the outlook for their own businesses than at any point last year," Rumbens stated.

"Few could have foreseen the geopolitical developments that have pushed economic uncertainty to record levels, and it seems this volatility is set to remain part of the business landscape for the foreseeable future.

"At this stage, many chief financial officers seem to be adopting a cautious approach, delaying major strategic moves until more certainty emerges."