As we dive into 2025, Australian business leaders are looking ahead with a keen focus on emerging technologies and digital transformation.
According to KPMG’s annual Keeping Us Up At Night survey, companies are placing an increasing emphasis on the opportunities and challenges presented by artificial intelligence (AI), while grappling with the ongoing issues of cost control and housing availability.
The survey of 320 Australian businesses reveals that digital transformation is no longer just a buzzword—it’s become the core challenge driving strategic decisions across industries. However, as businesses seek to modernize and automate, they are also contending with rising costs, inflation, and housing affordability, which have emerged as key societal concerns.
Key Focus Areas
- Digital Transformation & AI: Digital transformation and AI advancements top the list of challenges for businesses in 2025, with 53% of respondents citing it as a primary concern. The rapid pace of technological change and the need to stay ahead of competitors in an increasingly digitized world have made optimization and AI integration non-negotiable for many organizations. With AI continuing to rise in prominence, leaders are not only considering its benefits but also navigating the ethical implications surrounding its use.
- Cost Control Amid Inflation: As inflationary pressures persist, managing costs is still a significant focus for business leaders, with 39% of respondents identifying it as a major challenge. High core inflation and the uncertainty surrounding interest rates are making it difficult for many businesses to plan for the future. Despite expectations that rate cuts could provide some relief, there’s little belief that they will spark a substantial uptick in business investment.
- Housing Affordability Crisis: In a surprising twist, housing availability and affordability have emerged as top societal issues. A full 48% of business leaders are concerned about the housing crisis, which is becoming more critical as demand outpaces supply. The lack of affordable housing is seen as a broader societal challenge, with implications not just for workers, but for the broader economy. Business leaders are calling for a complete reassessment of the housing system, involving government, the construction industry, and community stakeholders.
- Cybersecurity Concerns: Cyber risks remain an ever-present threat for businesses in 2025. With 42% of respondents ranking cybersecurity as a key challenge, the threat of cyberattacks continues to rise alongside the sophistication of digital solutions. As businesses transition to more connected systems, the risk of data breaches, cyberattacks, and other security threats has become a significant concern.
- Workforce and Talent Development: While talent recruitment and retention were once at the top of the agenda, the latest survey indicates that it has slipped down the list of priorities. With historically low unemployment levels and increased migration over the past two years, business leaders feel more confident in their ability to meet staffing needs. However, the shortage of skills in key areas such as technology and data science remains a concern, and preparing for a future skills gap is a key societal challenge.
Looking Beyond 2025
While managing immediate challenges like cost control and cyber risks is critical for 2025, Australian business leaders are also planning for the future. Looking ahead to the next three to five years, 53% of respondents identify digital transformation and the optimization of technology as their primary focus. The rapid adoption of AI and other emerging technologies is expected to play a central role in future business success.
In fact, new technologies—including AI—are viewed as the most pressing challenge for the near future. With 48% of respondents emphasizing the importance of AI, businesses are focusing on how to use it effectively, from improving operational efficiency to exploring its ethical implications. AI’s potential to unlock new opportunities for growth is making it a key priority for Australian companies.
Another top concern over the next few years is identifying future market segments and innovation opportunities. 46% of respondents are focused on finding new avenues for business expansion and growth in the coming years, a significant rise from 29% last year. This indicates that, despite the current economic uncertainty, Australian businesses are already looking beyond the immediate horizon to seize future opportunities.
Impact of Geopolitics on Business
A growing concern among Australian business leaders is the impact of geopolitical disruptions. With 47% of respondents flagging geopolitical tensions and shifting regional cooperation as a major challenge, businesses are increasingly aware of the ripple effects that global trade disputes and economic shifts can have on their operations. As geopolitical instability continues to rise, companies are exploring how they can safeguard their business strategies in an increasingly uncertain global landscape.
Technology & Innovation at the Core of Success
According to Andrew Yates, CEO of KPMG Australia, the intersection of technology, AI, and cybersecurity has become a defining issue for business leaders. As technology continues to evolve at a rapid pace, businesses are finding that the challenges associated with these innovations are interconnected and require a unified strategy to address them.
“Leaders are concerned about meeting the demands of an increasingly digital world, particularly when it comes to technology skills and talent,” said Yates. “The rise of AI is significant, and companies are beginning to report higher-than-expected returns on their AI investments. As Australia seeks sustainable growth, AI will be key to driving productivity and competitive advantage.”
The Changing Role of Talent
Surprisingly, talent management has fallen lower on the priority list for many businesses. This shift can be attributed to a number of factors, including the increase in migration over the past two years, which has helped fill staffing gaps. However, the focus has shifted to the skills required to thrive in the digital age, particularly in fields like technology, data science, and health. The demand for a highly skilled workforce will continue to grow, but business leaders are becoming more adept at managing talent in a way that supports broader business goals. With the current economic challenges weighing on immediate business decisions, many leaders are also focused on opportunities for future growth. As they look to the next three to five years, 46% of respondents are prioritizing identifying new markets and innovation opportunities. This shift marks a change in mindset, with business leaders beginning to plan for the next phase of growth, even in the face of economic uncertainty.
As 2025 kicks off, Australian businesses are navigating a complex landscape of technological advancements, economic pressures, and societal challenges. Digital transformation, AI, cost control, and housing affordability are all on the radar as companies prepare for the future. Despite immediate obstacles, leaders are focused on innovation and long-term growth, signaling that Australian businesses are ready to adapt to the ever-changing business environment.
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