KPMG Australia CEO Andrew Yates: Business waiting for interest rates to drop

Andrew Yates says there is a strong anticipatory feeling within the business community that once interest rates start to drop, spending and consumer confidence will open back up.

KPMG Australia CEO Andrew Yates.

CEO SURVEY 2025: FULL COVERAGE

Economy

How would you rate the momentum of the Australian economy as we head into 2025? Official forecasts have Australia trimming interest rates from the first half of calendar 2025, is that consistent with your view? What are you seeing around inflation in your own business?

We see the Australian economy remaining weak into the new year, with the private side of the economy – households and businesses – limiting spending towards the “must-haves”. There is a strong anticipatory feeling within the business community that once interest rates start to drop, spending and consumer confidence will open back up – resulting in better times for the economy.

For the RBA to start cutting the cash rate from the beginning of 2025, inflation would first need to be holding at sustainable levels. However, it seems the RBA is looking to hold monetary policy settings tighter for longer – with a cut in the cash rate most likely being delayed to around the middle of the year. Concerns around services inflation, and the decoupling of wages and prices, is driving this higher-for-longer mentality.

From a KPMG perspective the supply constraints that had been negatively impacting our business, including tighter access to skilled staff, have now largely dissipated. Our view is that an early 2025 easing of monetary policy would help stimulate the economy for a more positive year.

Outlook

What excites you heading into 2025? Are you likely to increase, hold steady, or trim your investment spend?

KPMG is “all-in” with the use of AI. The realisation of AI to be transformative to not only our business, but also our clients’ businesses excite us about the future. Responsible use of AI has the potential to lift productivity growth rates together with the quality of services provided. We will continue to invest heavily in developing AI-related services and advice for clients, as well as skills for our people, while taking great care to ensure the integrity and quality of these services.

Reform

As we move into an election year, in your mind, what’s the single biggest lever that can/should be used to lift Australia’s competitiveness or productivity? This could be across any area from labour market, tax reform, training or other areas to encourage investment.

Productivity improvement is mission critical for Australia. While Australia remains at the productivity frontier for sectors like mining and agriculture, we have fallen behind in some other key industries. Policy that focuses on improving productivity needs to be broad ranging to encourage additional spending on output-enhancing technology, plus training to lift the skills of Australia’s workforce. An investment allowance, for example, either across the board or targeted at specific activities, would provide a welcome incentive for much-needed new investment to increase productivity and competitiveness. An investment allowance was used in Australia during the Covid-19 period so there is a recent precedent for it.

Geopolitics

Will a Donald Trump presidency have a potential impact on your business or sector (tariffs or streamlined regulation)? Does geopolitics drive a bigger part of your decision-making?

It’s clear the new Trump administration will adopt an “America first” framework that extends into its economic and geopolitical settings. However, how much this will directly impact businesses in Australia remains to be seen – largely because it’s uncertain whether the pre-election promises proposed by President-elect Trump will be employed literally or whether some variation will be adopted.

Our own modelling suggests the Australian economy could be impacted, albeit marginally, if the full suite of election promises is implemented. A concerning impact would be a continuation of higher inflation due to world prices being escalated by tariffs. If this were to occur, it would likely slow down the easing of monetary policy by the RBA, reducing local investment activity as a consequence. Anything that has the potential to slow down our clients’ investment intentions could naturally flow to impacting our growth prospects.

People

Has your organisation’s approach to flexible working – including working from home – evolved during the year. Is this likely to change further into 2025?

Our flexible working model continues to offer everyone the ability to work in the office, from home and client locations. Maintaining balance across these work environments is key to achieving individual, team and organisational goals. We encourage our people to prioritise their attendance in the office or client sites to enhance collaboration, strengthen connections and support wellbeing. Presently there are no plans to change these arrangements.

Technology

Where is your organisation along the AI journey – is it in the developmental stage, or are you now using the technology at scale across your business? If so, are benefits matching the promise?

We are well into advanced stages on our use of AI. We continue to find new and innovative ways to use our proprietary AI platform, called KymChat, in our daily business, but we always ensure it’s done in a responsible manner with a human in the loop.

In 2023 we were learning about the technology with chat tools. In 2024 we have moved to developing AI agents to assist our people in performing tasks, and next year we are excited about what could come from the new multi-agent orchestration technology to really embed AI into end-to-end processes.

We are incredibly proud that our Australian firm was recently named the first organisation in the world to achieve BSI/ISO 42001 certification for our approach to responsibly managing AI development. This has been an important step in providing our clients, our people and society as a whole with a third-party assessment that our AI platform is the gold standard of AI systems.

We are measuring the impact it is having in our business, and we have already seen over 200,000 hours of savings in the type of daily tasks that AI is helping us with, freeing up our people to spend more of their time on higher-value work.