Artificial intelligence has emerged as the foremost challenge keeping business executives awake at night, surpassing traditional concerns such as inflation, interest rates, and staff shortages. This shift in priorities was revealed in KPMG’s annual survey of 274 Australian C-suite executives and board members conducted towards the end of 2025.
The impact of new technologies, including AI, has also overtaken housing affordability as the leading societal concern, according to the survey. KPMG Australia Chief Executive Andrew Yates highlights the challenges companies face in navigating the potential uses, as well as the ethical implications, of AI. “We’re in the same position,” Yates stated. “For KPMG, probably the area that we’re finding the most quick adoption is in areas like tax, where you’ve got rules or precedent, [meaning] we’re finding the use cases for AI come to us more quickly.”
AI’s Rising Prominence Among Business Concerns
The survey asked business leaders to identify their top five challenges for 2026. Nearly two-thirds (63 percent) placed new technologies such as AI, including its use cases and ethics, among their biggest concerns. This marks a significant increase from 2025, when only 39 percent included AI in their top five concerns.
Digital transformation and optimization, which was the biggest concern (53 percent) in 2025, came in second this year, with 54 percent of business leaders including it among their top challenges. While inflation remains a challenge, it is no longer among the top concerns for 2026, despite nearly four in ten (39 percent) citing “cost controls in an inflationary environment” as a major challenge last year.
“I think what’s happened is there’s now a bit more recognition that inflation is probably going to be a bit higher than what we saw in the decade from 2010 to 2020,” said KPMG Chief Economist Brendan Rynne.
Productivity and Economic Outlook
Productivity has been a focal point of political discourse in the past year. Treasurer Jim Chalmers convened an economic reform roundtable in August to explore ways to revive the nation’s lagging standard of living growth. The Productivity Commission last year made 47 reform recommendations aimed at enhancing productivity.
Driving productivity growth was also among the top challenges identified by business leaders for 2026, with more than a third (35 percent) including it in their top five. Despite these challenges, Yates notes that businesses are more optimistic than they were 12 to 18 months ago, with concerns such as staff shortages diminishing.
“If you went back three to four years ago, particularly as we came out of COVID, the No.1 issue was attraction and retention of talent,” Yates said. “That really has disappeared right down the list.”
The unemployment rate, which hit a historical low of 3.5 percent in 2022, is now hovering above 4 percent, with the latest figures from the Australian Bureau of Statistics showing it remained steady at 4.3 percent in November.
Investment and Cyber Risks
Yates also observes a more positive outlook among business leaders regarding investment and expansion. “There are challenges CEOs have reported this year, such as continuing to look for growth, which are more positive,” he noted. “That’s opposed to if you’re in the depths of a recession, and you’re needing to lay off staff, for example. That’s a much harder, more negative issue to be dealing with, and we’re not seeing that come through the survey whatsoever.”
The proportion of business leaders concerned about cyber risks remained steady over the two years at 42 percent. Housing affordability also remained a top societal issue, with about half of the respondents citing it as a concern. However, the social impact of new and disruptive technologies, such as AI, claimed the top spot in 2026.
“There’s an awful amount of investment being deployed into AI,” Yates remarked. “There’s a sense that if you’re not investing, if you’re not riding the wave, then there’s a real possibility you may get left behind.”
The rise of AI as a concern among business leaders has likely been fueled by the emergence of generative technologies such as ChatGPT, along with a surge in investment in the technology. As businesses continue to navigate these evolving challenges, the focus on AI and its implications is expected to intensify in the coming years.
