The annual pre-Budget survey of our mid-market client base by KPMG Enterprise this year took place just two months before the Federal Budget which will be handed down on Tuesday, 14 May 2024.
Our survey of 100 leaders in mid-tier Australian businesses – ranging from listed companies just outside the ASX 200, to private companies and family businesses – reveals a mood of cautious optimism with more than a half treading carefully and suggesting growth of around 2-3% over the next 12 months, but with a doubling of that figure over the following two years.
The two top challenges for Mid-Market businesses in the next 1-3 years remains like prior years as cost and margin pressures and the recruitment and retention of skilled staff.
The survey themes highlight the shift in perceptions and the current and future challenges and opportunities faced by Mid-Market businesses in Australia, including economic conditions, business growth forecasts, wage expectations. Current and emerging perceptions include the impact of cost of living, tax reforms, AI implementation, work environment changes, and Superannuation Legislation.
Key shifts in perception since 2022/23
Mid-market business forecasting and growth
Optimism about business growth has remained relatively stable among Mid-Market businesses, with 80% forecasting growth over the next few years. The level of pessimism has remained stable in the last 12 months with 17% of businesses who are not forecasting any growth for this year and the near future.
Wage growth expectations
There has been a continued decrease in expected wage growth above 4% in the last 2 years. Most businesses are expecting a moderate increase in wages of 2-4% per cent.
Challenges for mid-market businesses
The two top challenges for Mid-Market businesses in the next 1-3 years remains like prior years as cost and margin pressures and the recruitment and retention of skilled staff. There are significant sector differences in the challenges that are most impacting businesses.
Current and emerging perceptions in 2024
Impact of cost of living
Majority of Mid-Market businesses believe the cost of living is challenging their ability to grow the business and generate demand. More than half feel it's having a moderate impact, while for nearly a quarter, it's having a significant impact.
Tax reforms and labour training
Close to half of Mid-Market businesses believe sector growth can be boosted by major tax reforms and greater investment in labour training programs.
Work environment changes
Most businesses (59%) do not anticipate any change in working arrangements while 41% will look to increase presence in the office, especially for publicly listed companies with some planning to mandate a minimum of days in the office.
Artificial Intelligence (AI) implementation
The widespread rise of AI is evident in Mid-Market businesses, with 42% of businesses having implemented AI in their business for specific applications. Among those who have yet to implement AI, there is a plan by two-fifths to do so in the next 2 years.
ATO compliance activity
The ATO has increased its compliance activity in recent years with a focus on targeting the use of trusts and tax planning. This is a concern for a third of businesses, but most businesses are not concerned or do not have trusts.
Superannuation legislation
More than half (54%) of mid-market businesses are in support of this legislation, to a certain extent, that will result in an additional 15% tax on the earnings of superannuation balances above $3 million. However, 46% are unsupportive, and of those that support in part, 48% do not support taxing unrealised gains in superannuation.
Research methodology
KPMG Customer Intelligence conducted a pulse check on behalf of KPMG Enterprise. This pulse check was targeted at clients who run mid-market firms, aiming to gauge sentiment around key issues before the 2024/25 Federal Budget is announced.
Australia’s mid market is often referred to as the engine room of the nation’s economy, employing nearly a quarter of all Australians, and responsible for almost 40 percent of Australia’s business revenue.
The survey was completed by more than 100 mid-market business directors and decision-makers. Most respondents were from private companies, however there were also some from publicly listed companies, family businesses and NFPs. Respondents also came from a range of industry sectors.
The survey results are a valuable indicator of Enterprise clients’ opinions concerning the current business and budget environment.
Supporting mid-market business
KPMG has the breadth of services and depth of knowledge to provide your business with the support it needs to navigate these evolving times, and understand how this year’s Federal Budget may affect your organisation.
Please get in touch if you have any questions.
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