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Nassim covers the accounting and tax rounds for BRW, as well as general business news. She previously worked for The Age newspaper covering general news, state politics and economics.

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Business view of Labor hits new low, but doubts about Abbott linger

Published 24 April 2013 00:00, Updated 24 April 2013 08:11

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Business view of Labor hits new low, but doubts about Abbott linger

Eighty four per cent of directors survyed by the AICD felt Julia Gillard’s Labor government didn’t understand business, with close to a third expressing the same view about Tony Abbott’s Coalition. Photo: Andrew Meares

More than 80 per cent of Australian company directors believe the Gillard government doesn’t understand business but more than 30 per cent think the Opposition led by Tony Abbott doesn’t either, a survey of 500 company directors across Australia reveals.

The survey by the Australian Institute of Company Directors found director sentiment has improved in the last six months, thanks to rising optimism about the Asian economy and growth in the Australian share market. But the relationship between business and the federal government has further deteriorated.

The Director Sentiment Index measures the opinions and future intentions of the director community, from a range of medium and large businesses. Its 2013 half-year findings reveal only 8 per cent of directors (down from 12 per cent in the previous survey taken towards the end of last year) agree with the statement: “The federal government understands business”.

Source: AICD / Ipsos

Fifty per cent of directors said the Opposition understands business.

“There may be a bit of rose-coloured glasses [view] happening here,” Institute spokesman Steve Burrell says. “When it comes to the Opposition, we haven’t seen the full gamut of what they’re proposing.”

Abbott may disappoint

One of Australia’s leading economists recently warned that businesses expecting an Abbott-led government to introduce key economic reforms may be disappointed.

The chief economist at Bank of America Merrill Lynch Australia Saul Eslake said Tony Abbott did not “have any instinctive feel for market forces”, and once in government may be reluctant to introduce key economic reforms.

The AICD survey finds that many businesses dislike the current government - nearly 90 per cent of directors believe the government’s performance has had a negative impact on consumer confidence, and 70 per cent of directors believe the government’s performance also impacts negatively on their business decision-making.

Economic policy and management were identified as the most important factors influencing directors’ votes. Infrastructure was ranked as the top priority the government needs to address.

For the first time since the index was created, the national broadband network is viewed favourably by directors, with nearly half of directors agreeing that the NBN is a positive thing for Australia, while less than 40 per cent of directors disagree with this statement.

Burrell says while business sentiment about the Gillard government is worse than ever, the next survey will be taken after the September 14 election and could see business take a less positive view of the Opposition.

“The second time around we may get may have different view of what the Opposition is proposing and may think they don’t understand as much about business as we thought,” he says.

“There’s still 32 per cent of people who think that the Opposition doesn’t understand business – that’s a fairly substantial group.”

Burrell says while the Gillard Government is less loved by the directors surveyed, business is generally sceptical of politicians.

“It may not be about a party but about the nature of government itself. Many politicians don’t have sufficient understanding about the way business works. It might be that there’s a problem with Canberra, rather than one party.”

Despite concerns about regulation and the carbon tax, there was some optimism expressed by directors. Almost 50 per cent of directors believe Asian economies will be strong over the next 12 months, up from 31 per cent last survey.

Nearly 70 per cent of directors expect the Australian sharemarket to grow in the coming year. This has helped push overall index up 15 points. But director sentiment is still largely negative, with the high Australian dollar and global economic uncertainty cited as the top economic challenges facing the nation.

While more than 40 per cent of directors claimed the growth of their business had weakened over the past six months, directors are becoming a bit more optimistic about the general business outlook. Over 40 per cent expect an increase in profits for the second half of this year, compared to profits for the same period last year.

The big concern for them is increasing red tape and excessive regulation. It was ranked as the second biggest barrier to productivity growth, after general economic conditions. Directors say board time spent on regulatory compliance has increased over the past 12 months, especially in relation to workplace health and safety.

The first half 2013 Director Sentiment Index survey was conducted with more than 500 Australian chairman, non-executive directors and executive directors of medium to large public and private sector organisations in March.

The Index is conducted by market research company Ipsos Australia.

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