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The latest KPMG Enterprise pre-Budget survey reveals that most mid-market businesses in Australia maintain a cautiously optimistic outlook. However, nearly a quarter express concern about the impact of the cost of living on business growth, with cost and margin pressures topping their list of worries.
Interestingly, one-third of respondents plan to tighten remote working policies in the coming years, with 8% intending to end home-working entirely. Yet, few are adopting incentives to encourage staff back to the office, unlike larger companies.
The survey, which polled 100 mid-market business leaders, indicates a mixed forecast for growth. While over half foresee slow growth of 2-3% this year, optimism increases for the next 2-3 years, with 30% predicting up to 10% growth. Wages predictions are cautious, with most expecting growth of 2-4% over the next 12 months.
The cost of living is a significant concern, with over half of respondents citing its moderate or significant impact on their companies, suppressing demand and hindering growth. Lower interest rates are seen as the most helpful measure to address this issue, followed by tax cuts and lower energy costs.
Regarding Budget measures to boost mid-market growth, major tax reform tops the wish list, followed by investment in training and skills and re-establishing critical manufacturing in Australia. However, recent tax changes, such as increased taxation of super balances and proposals to tax unrealized gains, have faced backlash from business leaders.
The survey also delves into the use of AI in the mid-market. While widespread adoption remains low, a significant portion of respondents plan to integrate AI into their operations in the next two years, citing efficiency and productivity gains as primary motivators.
Clive Bird, KPMG Enterprise Tax Partner, highlights the resilience of mid-tier businesses despite ongoing challenges, emphasizing the importance of addressing cost pressures and talent scarcity. But costs are clearly still a major challenge, and the scarcity of talent has not gone away as a major issue. Persistently high interest rates are clearly a problem for many businesses, but overall the results show a resilience which characterises the sector.”
He added: “Our annual survey consistently finds that raising the GST is the preferred method to raise revenue among business leaders. There is no little appetite for raising direct taxes given our tax system’s over-reliance on income taxes, and respondents still look to the Budget as an opportunity for significant tax reform.”
The survey also addressed the use of AI in the mid-market.
While no respondents currently used AI widely, 41% used it for specific areas and a further 40% planned to introduce it over the next 2 years. A minority (18%) had no plans for its use at all. Higher efficiency and productivity by automating routine operations and faster data analysis were the main attractions, while lack of technical capability and security concerns were seen as the biggest drawbacks.
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