CFOs at odds with structural economic shift

Chief financial officers' (CFOs') risk appetite has flat-lined as uncertainty continues to plague the industry and drive capital expenditure decisions, according to Deloitte's latest CFO survey.

CFOs posted the lowest risk appetite in a year-and-a-half. Eighty-four per cent of CFOs said now was not the time to take additional risk onto their balance sheets, while 94 per cent expected high levels of uncertainty to remain for at least the coming year.

Almost 75 per cent of CFOs listed a slowdown in China as the greatest influence restraining their optimism.

Deloitte's chief operating officer Keith Skinner said Deloitte Access Economics' research had shown Australia was now experiencing a major structural economic shift where capital investment, driven by the resources boom, would flatten out by mid-2014 before falling into decline.

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The imbalance between resource-driven regions which had seen enormous growth, and Australia's south-eastern quarter with growth rates of less than 2 per cent, needed to be addressed by focusing on developing exports and non-resource driven sectors, he said.

Skinner said capital expenditure would no longer drive Australia's growth, but despite uncertainty the survey revealed around two-thirds of CFOs expected to maintain or increase current levels of capital expenditure. 

It was at odds with what was actually happening in the resources sector, as the larger players had significantly reigned in previous commitments to capital expenditure, according to Skinner.

"This response may well reflect companies delivering on projects already committed to in earlier years, though it may also be signalling the start of the economic recalibration the economy will require as the momentum in resource sector investment slows over the next two years," he said.

General uncertainty continued to rule capital expenditure plans, with 35 per cent of CFOs listing it in top spot, followed by policy uncertainty (26 per cent), cost of labour (28 per cent) and funding availability (21 per cent).

Skinner said the Reserve Bank's interest rate cut was a positive sign for industries such as housing and retail, but more attention needed to be directed towards sectors that had been neglected during the resources boom.