The Australian Industry Group (Ai Group), the peak group representing national employers, has revealed that business leaders are cautiously hopeful for 2022 despite the seriousness of the anticipated disruptions.
The report for Australian CEOs expectations was based on a survey conducted across Australia in October 2021, which received 346 responses from CEOs of businesses that employ just under 120,000 people.
Ai Group Chief Executive Innes Willox said it was clear from the results that CEOs are expecting their businesses to face fresh COVID-19-related disruptions in 2022. These include additional supply chain challenges, intensifying skill shortages, and a continuation of cost pressures seen in 2021.
“As we discuss in the report, these expectations and their expectations of being able to pass some of these higher costs on to customers puts business leaders at odds with the relatively benign inflation outlook anticipated by the official economic agencies,” Willox said. “The inflation outlook is clearly a key area to watch over coming months.”
Two years into the pandemic, 79 percent of respondents were anticipating further disruptions, with almost half ranking COVID-19 as the biggest constraint to growth.
Most expect further supply chain disruptions, with only 17 percent expecting the situation to improve relative to 2021 and almost one-third anticipating no change to the circumstances.
Skill shortages were the third most named impediment of business growth, with almost three-quarters of CEOs expecting difficulty in finding and retaining skilled staff this year.
Businesses are preparing to face these issues through measures such as renegotiating supply contracts or finding alternative suppliers, improving online capabilities, and investing in staff development and new technology.
Despite these challenges, there is also cautious optimism for the year. More than two and a half times more CEOs expect to increase their workforce compared to the number who expect employee numbers to fall.
There was a large divergence in the inflation expectation of business leaders compared to official agencies, such as the Treasury and the Reserve Bank of Australia (RBA).
Almost four-in-five business leaders expect further cost pressures, with only one percent expecting costs to subside.
The RBA said in a November update, prior to the Omicron outbreak, that while Australia had experienced a lift in inflation like the rest of the world, underlying inflation figures were still low. This was again repeated in its December board meeting.
“Members noted that inflation pressures in Australia were lower than in many other countries … The central forecast was for underlying inflation to reach 2.5 per cent over 2023,” the board said.
Ai Group noted that this divergence in inflationary expectations was a “critical point” of difference that will be watched closely over the next few months.