Weak outlook weighs on business confidence: CEOs

A range of issues — namely, the looming federal election, high Australian dollar and weak consumer sentiment — has led some of Australia's most senior chief executives to say the outlook for business confidence is uncertain, according to The Australian.

The senior executives said that companies and their management will be in a tricky position through 2013 as the uncertain outlook encourages them to act cautiously, but Wesfarmers chief executive Richard Goyder said that businesses cannot become too risk-averse due to boards demanding higher returns on investments and shareholders calling for higher dividends.

"You do need risk-taking in business. Before, there was way too much risk-taking and some of that led to the excesses. But you need to have risk-taking in business. You need to have failures,” Mr Goyder told a Business Council of Australia round table form, according to The Australian. "At the moment I think it is probably too risk-averse. Hopefully that will change.”

Business confidence has bounced back from record lows reached last year, but the Reserve Bank of Australia's recent move to downgrade its forecast for the Australian economy will weigh on business optimism.

"If you look at the December quarter, business credit was negative. Housing credit for the quarter was 1.3. Annualise that and it is very low for housing credit,” Westpac chief executive Gail Kelly said, according to The Australian. "In the business scene, the sense of uncertainty about the politics of things always comes up in the conversation. The high dollar is also a factor feeding into businesses wanting to wait, because obviously business cases are that much harder when the dollar is where it is. Then consumer caution is the third thing. That has been a feature for the past few years. I think all of those trends will probably continue through the balance of the year.”

More from Business Spectator