Fewer predict a recession as confidence lifts nearly 10 points in latest AICD survey
Australian company directors are entering 2025 with renewed optimism about economic conditions, according to the latest sentiment survey by the Australian Institute of Company Directors (AICD)—but concerns over global instability and domestic regulatory burdens remain.
The Director Sentiment Index (DSI) rose nearly 10 points to -23.9. Although this marks the sixth consecutive survey where the index remains negative, it’s the sharpest improvement since 2021, reflecting a softening outlook on recession risk.
Only 25% of directors now believe a recession is likely in the next 12 months, a marked drop from 46% in late 2024. The survey suggests the Reserve Bank of Australia’s (RBA) February interest rate cut and reduced recession risk are key factors behind the shift in sentiment.
Still, the broader environment remains fraught with risk. Directors overwhelmingly identified global uncertainty—fueled in large part by escalating trade tensions under the Trump presidency—as the leading challenge for Australian businesses. Worries over protectionism have also intensified, eclipsing domestic concerns like productivity growth and cost-of-living pressures.
Closer to home, economic conditions and regulatory pressures continue to weigh on boardrooms. The top three issues keeping directors up at night are domestic economic performance, legal and compliance obligations, and cyber-crime—though the latter has dipped slightly in urgency.
AICD CEO Mark Rigotti said the regulatory burden has become a focal point ahead of the upcoming Federal election.
“We strongly believe this needs to be a priority for the next federal government, which is why the AICD has released a three-point plan to boost innovation and productivity with better regulation, better digital governance and better targeted disclosures. We’re calling on both major parties to announce what red tape they would repeal within the first 100 days of their government,” Rigotti said.
Regulation continues to shape board behaviour, with 59% of directors identifying it as the main factor influencing their board’s risk appetite. A further 67% expect compliance obligations to rise over the next year. Directors pointed to industrial relations (43%) and planning regulations (42%) as priority areas for deregulation.
When asked what issues will guide their vote in the federal election, most directors pointed to economic management first, followed by regulatory reform.
Despite the bounce in sentiment, AICD chief economist Mark Thirlwell warned that structural weaknesses remain.
“Double-digit rebounds in the measures of economic outlook and business conditions reflect the positive impact of the RBA’s February rate cut, along with the receding recession risk. But directors are balancing that good news against mounting global economic uncertainty and growing concerns about protectionism. And persistent domestic challenges including productivity growth, the housing crisis, cost of living pressures and skills shortages continue to weigh heavily,” Thirlwell said.
Other survey results indicate continued concern over workforce issues. Some 83% say there’s still a shortage of skilled workers and 55% expect the RBA to cut interest rates again in the next six months.
When it comes to government priorities, directors want action on bigger, long-term challenges. Boosting housing supply was the top choice for infrastructure investment (56%), while productivity growth was the leading issue for both short-term (35%) and long-term (30%) government action. Housing affordability (33%), energy policy (26%), and fixing the skills gap (24%) were also seen as important.
