Australian company directors are more positive than they’ve been in six years, but remain worried about inaction on housing affordability and tax reform ahead of the May federal budget.
The Australian Institute of Company Directors (AICD) survey of 1100 of its members found that directors have become less pessimistic about the future health of the Australian economy, although about 45 per cent still expect it to be weak.
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The Director Sentiment Index, undertaken between March 24 and April 3, found they expect an increase in inflation, wages and the cash rate in the next 12 months.
The survey found that directors reported business growth over the past six months, and continue to feel optimistic about the growth of their business with more than 55 per cent of directors expecting growth in the coming year. Almost 40 per cent of those surveyed expect an increase in profits this year.
Treasurer Scott Morrison says the government’s scalpel approach to housing affordability is working. Photo: Andrew Meares
“Directors are more confident than they’ve been in six years,” AICD chairwoman Elizabeth Proust said. “They are feeling this is a good time to be investing in hiring people.”
They also expect a stronger Asian economy over the next 12 months, and there is decreased pessimism regarding the US economy.
In the previous survey, undertaken towards the end of last year, Brexit and the election of US President Donald Trump had made people edgy, Ms Proust said, but those concerns had been ameliorated.
But directors view an ineffective taxation system as the biggest economic challenge currently facing Australian business. They feel taxation reform, energy policy and infrastructure should be the top priorities for the Turnbull government.
AICD chief economist Stephen Walters said signs there will be infrastructure spending in the May federal budget following recent comments from Treasurer Scott Morrison were encouraging. Mr Morrison has defined debt accrued to fund infrastructure projects as “good” debt.
“Directors are more confident than they’ve been in six years,” AICD chairwoman Elizabeth Proust said. Photo: Louise Kennerley
But Mr Walters said directors were concerned about inaction on tax reform and housing affordability. The AICD blueprint released last month called on the Turnbull government to review housing tax breaks including negative gearing and the capital gains tax discount.
Tighter controls on home purchases by foreigners were viewed by directors as the top measure that all levels of government should prioritise to ease the housing affordability crisis. This is followed by boosting housing supply and reforming negative gearing arrangements.
US President Donald Trump wants to cut the corporate tax rate to 15 per cent. Photo: AP
The AICD survey also found 60 per cent of directors think Australia’s corporate tax rate is too high. Mr Walters said there was now more pressure to cut company tax following America and Britain’s commitment to lower company tax rates.
Mr Trump has confirmed he wants to cut the corporate tax rate to 15 per cent and UK Prime Minister Theresa May wants to cut the rate to 17 per cent by 2020, and possibly even further thereafter.
Mr Morrison will reintroduce the remaining elements of its Enterprise Tax Plan when Parliament resumes for the budget.
Corporate tax rate cuts for companies with a turnover less than $50 million have passed, but the government wants reduce the company tax rate to 25 per cent for all companies.
Crossbench senators from the Nick Xenophon Team and One Nation remain opposed to any extension of the tax cuts to larger companies.
Mr Walters said the Labor opposition was trying to paint corporate tax cuts as tax cuts for the big banks, but “that’s not wholly true”. Both sides of politics had shown a failure to engage in meaningful tax reform, he said.