10 worries keeping Australia's business leaders awake at night

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The top concern of Australia’s business leaders is digital disruption, according to a survey by KPMG which ranks the 10 issues keeping corporate Australia awake at night.

Innovation, especially as it relates to the digital environment, is the number one issue exercising the minds of Australia’s business leaders going into 2018.

Cost competitiveness and energy policy take second and third place, according to new research by KPMG Australia.

KPMG’s recently acquired research practice, KPMG Acuity Research and Insights, surveyed almost 200 of the nation’s C-level executives to create a picture of what’s really occupying their minds as they consider the New Year.

The priority issues for Australian business leaders in 2018:

    1. Digital and Innovation
    2. Cost competitiveness
    3. Energy
    4. Regulation
    5. Government efficiencies
    6. Public trust
    7. Infrastructure and liveable cities
    8. Fiscal sustainability
    9. Big Data
    10. Health

“There are no shortage of voices in the public debate loudly declaring what is top of mind for business, but this report takes a measured and analytical look at the real issues of primary concern to business leaders,” says KPMG Australia CEO Gary Wingrove.

Wingrove says an organisation’s capacity to innovate in the digital space is the main concern.

“Today the nation’s business leaders understand that disruption looms around every corner,” he says.

“As 2018 approaches they are now clear about what they need to respond and seize opportunity: a culture of innovation.

“While no one can confidently predict the exact disruptions that lie ahead, the organisations that get their innovation culture right will be the ones who can harness change to their benefit.”

Digital and Innovation

KPMG says: “The rapidly evolving Australian landscape shows what is at stake when Australian businesses indicate they need to get their digital and innovation houses in order. Yet whilst digital has certainly gone mainstream in terms of the executive agenda, innovation is an area where we continue to lag as a nation.”

Cost competitiveness

Analysis shows underperformance from a productivity perspective compared to countries with similar standards of living.

“Traditionally, while Australia has had a high cost of labour, it has had a below average cost of electricity for industrial users. Unfortunately, this favourable cost-competitive position has been eroded over the past two years as domestic prices of electricity and gas have soared,” says Grant Wardell-Johnson, Lead Tax Partner, KPMG Economics and Tax Centre.

“Disadvantages in cost competitiveness can be ameliorated through a country’s corporate tax system – if it is more competitive than in other jurisdictions. Unfortunately, our survey respondents also suggested that instead of helping, Australia’s corporate tax system actually acts as a further impost on their ability to earn internationally competitive returns.”

Energy — cost, reliability and policy uncertainty

The bottom line pressure on companies will continue in the short-to-medium term. Most energy modelling analysis does not forecast major easing in energy prices until 2020.

“The year ahead will require organisations to assess their energy procurement strategies and seek power agreements that enable them to lock in prices with sufficient contract flexibility to take advantage of any potential easing from the back-end of 2019,” says KPMG Australia Chairman Alison Kitchen.

“In the event of power outages, the cost to businesses could be significant. If businesses do not have adequate contingency plans they could go under, with small and medium size businesses the most vulnerable.”

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