Business leaders remain optimistic: J.P. Morgan

A new survey from J.P. Morgan suggests Australian business leaders remain optimistic about growth, despite grappling with rising costs and other challenges driven by inflation.

The second annual Australia Business Leaders Outlook survey polled 200 senior executives of Australian mid-size companies and found levels of optimism outrank international counterparts. Less than half (46%) of local leaders anticipate a recession this calendar year, with higher expectations found in the United States (65%), the United Kingdom (69%), India (61%), Germany ((59%) and France (53%).

“Australian business leaders continue to demonstrate their resilience as they skilfully manage various geopolitical and economic obstacles,” said Annabelle Mooney, Head of Commercial Banking, Australia and New Zealand, J.P. Morgan.

“While they see potential for growth in the year ahead, they’ve had to be nimble, adopting and deploying new strategies in response to changing market conditions.”

Nearly six in 10 respondents (59%) feel confident about the economy at a global and local level, with over three-quarters (77%) expecting revenue increases and just under that figure (74%) signalling likelihood of a rise in profit.

“As we continue to withstand a complex and evolving economic environment, Australian mid-size business leaders are proving once again that they have the agility to keep pushing forward and combat the challenges that arise,” said Robert Bedwell, Chief Executive Officer, J.P. Morgan Australia and New Zealand.

Inflation, disruption and a tight labour market

Increased energy prices, spiralling interest rates and a higher cost of capital are driving inflated overall business costs. Leaders are addressing these challenges through price increases (43%), process automation (43%) and changing pricing models (42%). Almost half (45%) are passing up to 25% of increased costs on to consumers, with the majority (83%) suggesting this will likely continue.

Supply chain disruption continues, though less than half (40%) note pressure has increased in the last year and one-third (33%) find the situation has improved. Business leaders are allocating more funds to cover increased supply costs (41%) and shifting manufacturing and distribution closer to key markets (41%) to compensate.

The labour market remains a focus, with over half of respondents (52%) expecting to add headcount in the next year. Strategies to contend with high labour demand include:

• offering flexible work hours (54%)
• giving employees flexibility on where they work (51%)
• offering upskilling and training opportunities (51%)
• increasing wages and benefits (49%).

Corporate responsibility, culture and retention

In the year ahead, Australian mid-size business leaders are focusing on the importance of corporate responsibility factors, citing social (57%) and environmental (51%) factors, and diversity, equity and inclusion (57%) as most important to their business strategies — up 14, 14 and 16% respectively from 2022.

Top outcomes of these efforts are rooted in improving employee retention (52%) and building company culture (50%), up four and 11% respectively from last year.

Preparing for the future

Looking foward, over half of surveyed leaders expect to expand into new distribution channels (53%) and new geographical markets domestically (51%). Almost half (44%) plan to introduce new products and services.

Six in 10 shared that they are not planning to sell or transfer ownership (up 36% from 2022). For those considering a full or partial transfer, 30% intend to sell to a third party or management group — with 19% planning to transfer to family through a gift (12% from 2022). More than seven in 10 (72%) expect transfers to take place within the next two years.

Image credit: iStock.com/MicroStockHub