Two in five company directors across Australia believe current monetary settings by the Reserve Bank of Australia will cause a major uptick in business insolvencies.
This is according to a survey by the Australian Institute of Company Directors (AICD), conducted by Roy Morgan.
The Institute’s Director Sentiment Index (DSI) for the first half of 2026 shows boards were already approaching the year with a level of caution even before the outbreak of hostilities in the Middle East, with expectations that economic and operational risks would increase over the next 12 months.
While 41 per cent expect insolvencies to uptick thanks to current RBA policy, 84 per cent believe there will be further interest rate rises in the next six months.
This comes as the latest ASIC data shows overall insolvencies in 2026 has been trending slightly below last year, albeit still quite elevated. In March 2026, total insolvencies hit 1,597, which is down from a peak of 1,918 in March 2025, but above March 2024 when it was 1,401.
Year-on-year, insolvencies in the first three months have been lower than the same time in 2025.
Returning to the DSI survey, a quarter of directors reported global economic conditions had curtailed their investment plans. Almost 90 per cent expect business costs to rise, and for material impacts on Australia’s trade flows, supply chains and commodity prices, partly driven by the Trump administration’s economic policies.
Productivity growth remains the top issue directors want governments to address both in the short and long term, and domestic economic conditions have emerged as the number one thing keeping directors awake at night. Concerns around artificial intelligence, cyber security and regulatory burden also continue to climb.
AICD managing director and CEO Mark Rigotti said Australian directors are navigating an increasingly complex risk environment, with productivity pressures, rising costs and accelerating technological change converging at the board table.
“Boards are embracing the opportunities AI presents, but they are equally clear‑eyed about the governance, cyber and workforce risks that must be managed if Australia is to lift productivity and competitiveness,” he said.
The DSI also shows that nearly two‑thirds of directors claim artificial intelligence (AI) tools have already delivered productivity benefits, and more than four in five expect AI implementation to increase over the next year.
However, more than half say the pace of change is faster than their organisations can keep up with. Vulnerability to cyber‑crime, data security and the potential misuse of AI are seen as the major risks.
Just over 40 per cent of directors expect AI will impact workforce size, which is more pronounced in the Information Media and Telecommunications as well as the Administrative and Support Services sectors.
Despite the lift in AI, more than half of directors (53 per cent) expect no impact on the size of their organisation’s workforce within the coming year.
Flexible work arrangements also continue to feature as a key workplace consideration. More than 70 per cent of organisations offer remote or hybrid working arrangements and plan to maintain them over the next 12 months.
AICD chief economist Mark Thirlwell said caution remains a key factor among directors, as businesses deal with disruption and high levels of uncertainty associated with global economic volatility and the rapid uptake of AI.
“While productivity concerns still dominate, the fuel and energy crisis unfolding as a consequence of the Middle East conflict will only intensify the challenges being felt in the economy,” Thirlwell said.
“It’s also important to take account of the effect of rising interest rates. Apart from the issues this creates for households and the flow on effects in the economy, the impact on businesses is hitting particularly hard.”
The level of concern over inflation and rising interest rates as a major challenge for business has jumped from 6 per cent in the previous survey to 24 per cent now.
The DSI also shows that 51 per cent of directors think more skilled migration could help lift productivity, a drop from 59 per cent in the previous survey.
Over two-thirds (68 per cent) say regulatory and compliance requirements are limiting productivity growth in their business. And nearly three-quarters (73 per cent) believe a major deregulation agenda would strengthen Australia’s productivity and economic growth.
Just over half (52 per cent) say planning regulations should be the main focus for deregulation followed by industrial relations (50 per cent).