According to Deloitte’s biannual CFO Sentiment report, released earlier this month, confidence in the Australian economy has almost doubled in six months, reaching its highest level since late 2022.
Yet, paradoxically, optimism about individual business performance has plunged, as concerns over shrinking margins, sluggish household spending and strategic execution challenges take centre stage.
“This is the first time business and economic confidence have diverged since we began measuring both sentiments almost three years ago,” Deloitte partner and CFO program leader Stephen Gustafson said. “It shows how constant changes to global tariff and trade policy is contributing to a sense of uncertainty and keeping risk appetites subdued.”
Net uncertainty among CFOs surged to 92 per cent – the highest in over two years – with many expecting profits and employment to decline over the next 12 months.
While macro indicators show improvement – interest rates are falling, inflation is broadly under control and policy stability has followed the recent federal election – those tailwinds aren’t flowing through to boardrooms.
“CFOs are unarguably more optimistic about the Australian economy than they have been in years,” Deloitte Access Economics partner David Rumbens said. “But just because the economy is doing better than it was, does not mean that it’s yet in fantastic health.”
“Economic growth remains sluggish and is still going backwards on a per-capita basis. This has implications for household spending which remains subdued and is contributing to expectations of lower margins and profits for businesses,” Rumbens added.
The shift in mood also reflects a changing perception of risk. Namely, according to Deloitte, external shocks like interest rates or inflation are no longer top of mind. Instead, it’s internal challenges such as execution failures, underwhelming transformation programs and persistent productivity malaise.
An inability to execute strategies is now the number one internal risk for 62 per cent of CFOs, while cost control and efficiency top the priority list for 80 per cent. Modernisation efforts are ramping up with 48 per cent of CFOs expecting capital investment to rise in the year ahead, up from 35 per cent six months ago.
“Low productivity growth has been a persistent issue that has been dragging down business and economic performance for years,” Gustafson said. “So it is no surprise that CFOs are looking to reassess and streamline workforce strategies while simplifying operations.”
CFOs are also betting big on artificial intelligence – but the benefits are proving elusive.
Namely, Deloitte highlighted that AI adoption has jumped sharply with 83 per cent of CFOs now admitting their organisation is using the technology, compared with 67 per cent six months ago, while use in finance departments has more than doubled.
Still, execution is a recurring challenge, with Gustafson noting that most firms remain in the early stages of adoption and are struggling to scale.
“Although AI adoption is growing, its use remains fragmented and weighted towards a ‘bottom-up’ approach rather than advanced ‘top-down’ AI strategies that promote strategic alignment across the business,” he said, adding that lack of structure, coupled with high investment costs and talent shortages, is limiting value creation.
“This could suggest that organisations have started using AI before developing a formal adoption strategy, or that the technology is evolving too quickly for strategies to remain relevant,” he added.
Looking ahead, Deloitte said businesses are hoping interest rate cuts will provide breathing room, but few are expecting a full recovery.
“Rising optimism throughout 2024 suggested that CFOs were preparing for a stronger year ahead in 2025,” Rumbens said. “However, that upbeat sentiment has since been dialled back.”
Uncertainty around global trade policies is likely to weigh on strategic confidence for months to come, Deloitte said, adding that despite high awareness of tariff risks, most companies remain in wait-and-see mode.
“Many CFOs seem to be adopting a cautious approach, delaying major strategic moves until more certainty emerges,” Rumbens concluded.
