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Australian CEOs say trade war is a threat to business growth

01 Feb, 2019
191
Australian CEOs

One in three Australian CEOs are projecting a decline in global GDP growth this year, up from just 7 per cent a year ago, according to PwC’s 22nd Annual Global CEO Survey.

The survey, which interviewed approximately 3,200 CEOs from 91 countries, including 131 respondents from Australia, also shows a dip in the confidence of Australian CEOs when looking at their own organisation’s revenue growth for 2019 and over the next three years, with 61 percent pointing to trade conflicts as a threat.

Australian CEOs are also looking inward for growth, with 71 per cent relying on operational efficiencies and 80 per cent on organic activity to drive growth.

PwC Australia CEO Luke Sayers said the CEO survey shows that global business leaders are adjusting their strategies to seek out their most opportunistic path for growth.

“This is not the case in Australia though, with a lack of action from business leaders to minimise the potential impact of trade conflicts on their organisation’s growth, or better yet, to seek out strategic opportunities.

He said that although Australia might not be in the firing line, that doesn’t mean businesses should not think about the impact, either positively or negatively.

“While Australian CEOs are not shifting their business models in response to trade tensions, two-thirds of CEOs around the globe have made changes to their operating model and growth strategies and a further one in four are shifting their growth strategies to alternative markets.

“In this dynamic, fast-paced environment, Australian CEOs have an opportunity to secure more advantageous supply-chain arrangements, and they should also be looking at opportunities to invest in markets behind the trade barriers to take advantage of them.

“At the same time it’s essential we support our government in maintaining and improving on the trade rules that underpin the international multilateral trading system because there are rarely any real winners in a trade war,” Mr Sayers said.

Australia overtakes US as China’s top market for growth

Trade tensions between China and the US have had a significant impact on how Chinese CEOs are thinking about market opportunities over the next 12 months and has led to Australia being identified as the top market for growth outside their home market, a major change from 2018 when Australia did not even make the top 10.

PwC’s survey shows Australia has usurped the US for the number one spot, with 21 per cent of Chinese CEOs now naming the lucky country as the top market for growth. Chinese CEOs are radically revising their growth ambitions and only 17 per cent of Chinese CEOs now name the US as a market for growth, down from 59 per cent in 2018.

Australia comes in at 10th place overall as a market for global CEOs growth prospects over the next 12 months, with 5 per cent of global CEOs naming Australia in their top three most attractive markets. However, CEOs were strikingly non-committal when identifying their top three most attractive markets — ‘don’t know’ at number three ranks higher than Germany and India.

PwC Australia CEO Luke Sayers said that with current geopolitical tensions it is not surprising that Australia features highly as a top market for growth for Chinese CEOs in 2019, after dropping off the list last year as a result of resources coming off the boil and technology taking centre stage.

“If you look around the developed world our economic performance is second to none and it has been for 28 years. We have a relatively long history of interest from Chinese companies and we’re seen as a stable, predictable and developed market,” he said.

“There are a number of sectors and industries that will present challenges for foreign companies in terms of FIRB scrutiny, but we are certainly not a hostile environment for Chinese investors outside of sensitive sectors. Government could view this as an opportunity to remind Chinese companies that Australia remains open for business.”

 AI to displace more jobs than it creates

The majority (86 per cent) of Australian CEOs know that Artificial Intelligence (AI) will significantly change the way to do business in the next 5 years and more than half (57 per cent) believe that AI will have a larger impact on the world than the Internet Revolution.

Nevertheless, only 29 per cent have plans to start introducing AI initiatives in their organisations in the next three years, compared to 35 per cent of their global peers.

PwC’s survey also shows while 73 per cent of Australian CEOs believe that AI is good for society, almost half (47 per cent) agree that “AI will displace more jobs than it creates in the long run”.

“It’s great to see Australian CEOs recognising the power of AI and the dramatic change it will bring to the way Australians interact and transact,” Mr Studley continued.

“AI has the potential to bring so much good to society, but the concern about job displacement is one we can’t dismiss lightly. The imperative is on businesses to start identifying and planning for the impact of AI on their industries, business and people.”

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