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What keeps Australia’s business leaders up at night?

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

KPMG's recently acquired research practice, KPMG Acuity Research and Insights, took the views of almost 200 of the nation's C-level executives to create a sharp picture of what's really occupying the minds of business leaders as they consider the year ahead.

"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," said KPMG Australia CEO, Gary Wingrove.

Digital and Innovation is the clear number one issue

"Whether you're the leader of a small or medium enterprise, or a senior executive at a major corporation, your organisation's capacity to innovate in the digital space is your main concern,” he said.

"Today the nation's business leaders understand that disruption looms around every corner... 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."

Cost competitiveness is the second main issue of concern for leaders

“Analysis of Australia’s productivity levels shows we are underperforming from a productive output perspective compared to countries with similar standards of living. This validates the concerns regarding labour cost competitiveness raised by our survey respondents,” commented Grant Wardell-Johnson, Lead Tax Partner, KPMG Economics & Tax Centre.

“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.”

“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,” he said.

Energy – cost, reliability and policy uncertainty – is the third most pressing issue

KPMG Australia Chairman, Alison Kitchen said: “The bottom line pressure on companies will continue in the short-to-medium term. Most energy modelling analyses do 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.”

“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.”

“The coming year will see many trials that will scale into larger implementation across a wide range of technologies. And we need to start establishing an orderly transition to more renewables in our generation mix,” she said.

In conclusion, Alison Kitchen noted: “In 2018, Australia needs to break out of the holding pattern of recent years. We need to see a year of genuine action.”

The top 10 list

The top priority issues of concern for Australian business leaders in 2018 are:

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