Uncertainty, inflation and slowing demand top industry concerns for 2024

The national employer association the Australian Industry Group (Ai Group) has today released its survey of Australian Industry Expectations for 2024.

Ai Group Chief Executive Innes Willox said: "While Australia's industry leaders are optimistic about their ability to navigate the challenges of the year ahead, most are concerned about the impacts of inflation, slowing demand and geopolitical uncertainty."

Since 2012, Ai Group has annually surveyed CEOs and leaders from across Australian industry. This year, over 300 senior leaders from across the manufacturing, construction, technology and supply chain and industrial services fields shared their views on the outlook for 2024.

"Expectations for 2024 are relatively weak: 40% of industry leaders expect business conditions to be weaker in 2024 than 2023, while only 27% expect them to be better. This is the lowest outlook seen in the Ai Group survey since the end of the mining boom," Mr Willox said.

"Investment plans for 2024 are attuned to these modest economic expectations. Improving productivity is a core theme, with business process improvement and staff training top of the investment priority list for 2024.

"Technology will play a big part in delivering this agenda, with 36% of industry leaders listing technology as one of their top investment priorities.

"Cybersecurity concerns continue to grow and industry is on the front-foot, with cybersecurity-related ICT the highest ranked of the technology investments for the year ahead.

"As we show in our report, these strategies and investment priorities are critical for Australian businesses to achieve the economic resilience needed for prosperity in a time of growing global economic uncertainty.

"The Federal Government in particular needs to put productivity and workplace flexibility at the forefront, especially considering the challenges introduced from workplace relations changes last year.

"We need to consolidate the successes of Australian business coming out of the pandemic-era volatility and shore-up our defences to prosper through the lower growth conditions ahead," Mr Willox said.

A full copy of the Ai Group survey report is available here.Key findings of the 2024 survey

• Australian industry leaders are concerned about the year ahead. 40% expect business conditions to be weaker in 2024 than 2023, while only 27% expect an improvement. Net optimism for 2024 (-13) is the lowest score seen in this survey since the end of the mining boom over a decade ago.
• Expectations for 2024 are mediocre, with Australian industry expected to grow at an anaemic rate. The outlook is net positive for revenue, employment, margins, investment and technology. However, expected growth is low, with all indicators at or near their lowest levels in a decade.
• Three factors – uncertainty, ongoing supply-side constraints and weakening demand – will be the main inhibitors in the coming year. While uncertainty and supply constraints have been common since the pandemic, a weak industrial demand outlook for 2024 is a concerning new development.
• Industry plans for 2024 are adapted for a more challenging environment. Technology and innovation will be a top priority for industry leaders: either to drive cost savings in the face of inflation and rising wages, and/or to find and develop new markets in a slowing economy.
• Investment efforts will focus on productivity over growth. Business process improvement and staff training top the investment priority list for 2024. These productivity-oriented investments rank well ahead of growth-oriented options such as capex, R&D and conventional business development.
• Supply chain strategies will shift from managing disruptions to controlling costs. 78% expect their input prices to rise in 2024, but only 57% plan to raise sales prices. To defend margins, industry leaders will prioritise cost control in their approach to supply chain management in the coming year.
• Growth strategies will focus on the product offering. Most industry leaders intend to introduce new products and services and/or improve their current offerings. There is a clear preference for developing Australian over international markets, given lingering uncertainties about the global environment.
• Staff shortages will continue in 2024, with 87% of industry leaders expecting to be affected. To manage labour supply risks, they plan to invest in training, increase wages and benefits, and change operational processes to lower labour demand.

Ai Group's 2024 Industry Expectations Survey was conducted in October and November 2023. Responses were received from leaders of 320 private-sector businesses across Australia. Collectively, these businesses employed 126,338 people (approximately 0.9% of the Australian labour force) and had aggregate annual revenue of just over $56 billion in 2023 (approximately 1.3% of Australian business revenue).