The verdict is in: three days a week in the office is the ideal solution for hybrid work, with 74% of Australian CEOs expecting this model to continue, according to KPMG research.
What’s happeningAccording to KPMG International’s annual CEO Outlook, Australian CEOs are significantly more confident about domestic economic growth than their global counterparts. However, expectations for returns on full-time offices have fallen from 82% to just 22% in one year.
Why this matters: The dramatic shift in workplace expectations confirms that hybrid work is the permanent model for Australian business, with three days in the office being preferred, despite increasing AI investment priorities.
Australian business leaders are outpacing their global peers in economic optimism while abandoning expectations of a full return to office, marking a significant shift in the way CEOs view both growth prospects and workplace strategies.
KPMG International’s eleventh annual CEO Outlook, which covers 1,350 CEOs in eleven leading economies, including Australia, shows that Australian CEOs have dramatically reversed their return to office expectations. Only 22% now say they expect company employees to return to 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 employed in the next three years.
When asked about the expected work environment for their corporate employees, 74% of Australian leaders expected a hybrid model to persist, compared to 66% globally. Forty-eight percent of Australian CEOs expected hybrid with three days in the office, 8% said hybrid with two days in the office and 18% said hybrid with four days in the office. No Australian CEO thought the roles would be completely remote.
“The majority of CEOs have said that three days a week in the office is the ideal place for them, but I think ultimately it comes down to what works for each company,” Yates said.
“The figures confirm what we have long suspected: a return to a fully back-in-the-office workforce in Australia is unlikely.”
The findings are consistent with previous research showing the business benefits of flexible work arrangements. In 2023, 84% of ANZ companies viewed hybrid and remote work adoption as a boon to their bottom line, with CEOs identifying hybrid work flexibility as the key driver for successful employee experience strategies.
However, technological gaps remain a concern. Less than half (43%) of ANZ organizations believe their employees have access to the technology needed for effective hybrid work.
Optimistic gap
Nearly 90% of Australian CEOs are confident about the growth prospects of the domestic economy over the next three years. That compares with 82% of CEOs worldwide who expressed confidence in their own domestic economy.
“I’m not surprised that Australian CEOs remain optimistic about the growth of our economy as household spending has recently risen and the RBA has cut cash rates. While the global economy continues to face uncertainty, Australia is less affected by tariffs than many other countries and so our export markets have remained strong,” said Andrew Yates, CEO of KPMG Australia.
Confidence in the growth prospects of their own organizations remained high, with 80% of Australian CEOs saying they were optimistic about the next three years. Still, that optimism had weakened somewhat, compared to 86% a year ago.
When it came to global economic growth, Australian CEOs were less optimistic than their American and Japanese counterparts. Sixty-six percent of Australian leaders said they were confident about global growth prospects over the next three years, up 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 divergent sentiment reflects Australia’s unique economic position. While global uncertainty continues, particularly around trade tensions and tariffs, Australian export markets have remained resilient and the Reserve Bank’s recent cut in cash rates has boosted domestic confidence.
AI investment paradox
Seventy percent of Australian CEOs said AI was a top investment priority, a sharp increase from 58% last year. Despite this enthusiasm, the research revealed a significant investment gap compared to global peers.
Nearly a third (29%) of Australian CEOs spent less than 10% of their total investment budget on AI. This was almost double the share of companies worldwide (17%) investing less than 10% of their total investment budget in AI.
Comparatively low investment levels among Australian CEOs were coupled with 40% of Australian CEOs admitting they were learning as they went when it came to AI, while only 23% of companies said they were advertising globally. Yet Australian companies continued to tout their readiness for AI, with 82% of Australian leaders saying their boards were equipped to guide the adoption 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 will not be able to realize the full productivity benefits,” Yates said.
“Australia is at a pivotal moment in harnessing the power of AI, but adoption requires more than just enthusiasm; it requires a strategic plan that builds confidence in its use.”
“By enabling companies to invest in AI and equip the workforce with the necessary training, we can not only drive innovation, but also ensure that the benefits of AI are distributed fairly across the economy,” said Yates.
Risk mitigation priorities
When it comes to mitigating business risks, cybersecurity and digital risk resilience were the largest area of increased investment; 36% of Australian CEOs said this was an area of focus.
The emphasis on digital security reflects the increasing complexity of working in an increasingly distributed workforce environment, where traditional perimeter-based security models are no longer sufficient.
High-performing companies that increased IT spending and invested in employee experience technology reported 56% greater business growth and 89% greater employee satisfaction compared to underperforming companies, illustrating the tangible benefits of a well-supported and technologically empowered workforce.
KPMG’s CEO Outlook provides a snapshot of executive sentiment at a pivotal time for corporate Australia, with leaders simultaneously navigating economic uncertainty, technological transformation and fundamental shifts in workplace culture. The data shows that Australian CEOs are approaching these challenges with confidence tempered by pragmatism, especially when it comes to AI investments and workplace flexibility.
READ ALSO: CEOs advocate hybrid work as a key employee strategy
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