The verdict is in: three days a week in the office is the sweet spot for hybrid work, with 74% of Australian CEOs expecting this model to continue, according to KPMG research.
What’s happening: Australian CEOs are significantly more confident about domestic economic growth than their global counterparts, according to KPMG International’s annual CEO Outlook. However, expectations for full-time office returns have collapsed from 82% to just 22% in one year.
Why this matters: The dramatic shift in workplace expectations confirms hybrid work as the permanent model for Australian business, with three days in the office emerging as the preferred arrangement despite rising AI investment priorities.
Australian business leaders are outpacing their global peers in economic optimism whilst simultaneously abandoning expectations of a full return to office, marking a significant shift in how CEOs view both growth prospects and workplace strategies.
KPMG International’s 11th annual CEO Outlook, covering 1,350 chief executives across 11 leading economies including Australia, reveals that Australian CEOs have dramatically backflipped on their return to office expectations, with just 22% saying they now expected corporate employees back in the office full-time in the next three years. That was a sharp drop in expectations compared to a year ago, when 82% of Australian CEOs said they expected their workforce to be fully in office in the next three years.
Asked what the expected working environment was for their corporate employees, 74% of Australian leaders expected a hybrid model to continue, compared to 66% globally. Forty-eight percent of Australian CEOs expected hybrid with three days in the office, 8% said hybrid with two office days and 18% said hybrid with four days in the office. No Australian CEOs thought that roles would be fully remote.
“The majority of CEOs have said that they’ve found three days a week in the office to be the sweet spot, but I think ultimately it’s about what works for each business,” Yates said.
“The numbers confirm what we have long suspected: a return to a fully back-in-the-office workforce in Australia is unlikely.”
The findings align with earlier research showing the business benefits of flexible work arrangements. In 2023, 84% of ANZ businesses viewed the adoption of hybrid and remote work as a boon to their bottom line, with CEOs placing hybrid work flexibility as the top driver for successful employee experience strategies.
However, technology gaps remain a concern. Less than half (43%) of ANZ organisations believe their employees have access to the technology required for effective hybrid work.
Optimism gap
Almost 90% of Australian CEOs are confident in the domestic economy’s growth prospects over the next three years. That compares to 82% of CEOs globally who expressed confidence in their own domestic economies.
“I’m not surprised that Australian CEOs are still feeling optimistic about the growth of our economy, given household spending has seen a recent uptick, and the RBA has cut the cash rate. While the global economy is still facing uncertainty, Australia is less impacted by tariffs than many other countries and so our export markets have remained strong,” said KPMG Australia CEO Andrew Yates.
Confidence in the growth prospects of their own organisations remained high, with 80% of Australian CEOs saying they were optimistic over the next three years. Still, that optimism had softened somewhat, down from 86% a year ago.
When it came to the growth of the global economy, Australian CEOs were less optimistic than their US and Japanese counterparts. Sixty-six percent of Australian leaders said they were confident in global growth prospects over the next three years, an uptick from 62% a year ago, but lower than in the US, where 73% of CEOs were optimistic, and in Japan where 72% said they were confident.
The divergence in sentiment reflects Australia’s unique economic position. Whilst global uncertainty persists, particularly around trade tensions and tariffs, Australia’s export markets have remained resilient and the Reserve Bank’s recent cash rate cut has provided a tailwind for domestic confidence.
AI investment paradox
Seventy percent of Australian CEOs indicated that AI was a top investment priority, up sharply from 58% last year. Despite this enthusiasm, the survey uncovered a significant investment gap compared to global peers.
Nearly a third (29%) of Australian CEOs were committing less than 10% of their overall investment budget to AI. This was nearly double the proportion of companies globally (17%) investing less than 10% of their overall investment budget in AI.
The proportionately low investment levels among Australian CEOs were coupled with the fact that 40% of Australian CEOs admitted to learning as they go when it came to AI, compared to just 23% of companies saying they were ad-libbing globally. Still, Australian companies continued to tout their AI readiness, with 82% of Australian leaders saying their board was equipped to navigate the adoption of and strategic use of AI.
“Without a national plan and effective regulation around the responsible use of AI, Australians are unwilling to trust it, and without trust there will continue to be a lack of investment. Without investment, we won’t be able to reap the full productivity benefits,” Yates said.
“Australia stands at a pivotal moment in harnessing the power of AI, but adoption requires more than just enthusiasm, it requires a strategic plan that builds trust and confidence in its use.”
“By empowering businesses to invest in AI and equipping the workforce with the necessary training, we can not only drive innovation but also ensure that the benefits of AI are shared equitably across the economy,” Yates said.
Risk mitigation priorities
When it came to mitigating business risk, cybersecurity and digital risks resilience were the biggest area of increased investment with 36% of Australian CEOs saying it was a focus area.
The emphasis on digital security reflects the growing complexity of operating in an increasingly distributed workforce environment, where traditional perimeter-based security models no longer suffice.
High-performing companies that increased their IT spending and invested in employee experience technology reported 56% more business growth and 89% greater employee satisfaction compared to underperformers, illustrating the tangible benefits of a well-supported and technologically empowered workforce.
The KPMG CEO Outlook provides a snapshot of executive sentiment at a pivotal moment for Australian business, with leaders navigating economic uncertainty, technological transformation and fundamental shifts in workplace culture simultaneously. The data suggests Australian CEOs are approaching these challenges with confidence tempered by pragmatism, particularly when it comes to AI investment and workplace flexibility.
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