Confidence in the Australian economy and in business conditions has rebounded in the first half of the year - Director Sentiment Index 1H 2025

There are early signs of recovery in the Australian economy but these have been moderated by developments in the world economy and increasing concerns over a global trade war

The Director Sentiment Index (DSI) improved for the first time since 2021, lifting from its post-pandemic low in the second half of last year by 9.7 points.

However, the overall index remains in negative territory for the sixth consecutive survey at -23.9, held down by mounting global economic uncertainty and underlying structural issues in the domestic economy.

The outlook for Australia received a boost following the RBA'S February interest rate cut and significantly fewer directors believed a recession was likely within the next 12-months.

But moves by the Trump administration in the United States are having a big impact.

Nine out of ten directors believe escalating trade tensions threaten the economic outlook for both Australia and the world. Global uncertainty is now seen as the top economic challenge facing Australian businesses, and concerns over global protectionism have risen significantly.

AICD Managing Director and CEO Mark Rigotti said it was clear that businesses are continuing to face a very challenging environment.

• 59% say compliance & regulation is the main factor affecting their board's risk appetite
• 67% expect regulatory compliance to increase over the next 12 months
• 35% say productivity growth is the main issue for Federal Government to address in the short term and 30% long term
• Housing affordability (33%) is the next short term priority followed by energy policy (26%) and the skills shortage (24%)
• 56% nominate housing supply number one for infrastructure investment
• 83% agree there is still a skills shortage in the Australian workforce
• Approximately 60% say flexible work arrangements have a positive impact on staff recruitment, retention, and health & wellbeing
• 40% say it has a negative impact on innovation and cyber security