The relationship between the nation’s businesses and the Federal Government has plunged new depths, according to the latest survey of company directors.

Conducted by the Australian Institute of Company Directors (AICD), the survey found that that only 8 per cent, down from 12, agreed with the statement that ‘the Federal Government understands business’, while 50 per cent said that the Federal Opposition understands business.

Despite the decline in confidence in the Government, overall director sentiment has improved in the last six months on the back of confidence in the future health of the Asian economy, while domestic markets have also been a source of improved confidence.

The report found that 50 per cetn of directors believe the Asian economy will be stronger over the coming 12 months, up from 31 per cent. A further 70 per cent of directors expect the Australian share market to grow over the coming year.

These combined factors pushed the overall director sentiment index up a 15 points, but not enough to drive it out of negative, with the strong Australia dollar, global uncertainty and red tape all contributing to keep directors generally pessimistic.

“It is a positive sign that overall sentiment is improving on the back of some encouraging data about the future of the global economy,” said John Colvin, Chief Executive and Managing Director, Australian Institute of Company Directors.

“While more than 40 per cent of directors claimed the growth of their business had weakened over the last 6 months, directors are now equally optimistic and pessimistic (about 30 per cent respectively) about the general business outlook, and the outlook for their own sector.” 

Directors have also rated increasing red tape and excessive regulation as the second biggest impediment to productivity growth, after general economic conditions.

“Business is increasingly concerned about regulation and its impacts. It distorts the operation of the market, slows up the engines of growth and job creation and stifles wealth creation in the economy.  It is a drag on entrepreneurial activity and distorts business behaviour,” he said.

“Directors are saying that deregulation is a crucial part of the agenda for boosting national productivity and must be a priority for Government.”

The full report can be found here