Hiring struggles have tumbled down the list of issues worrying Australia’s business leaders as the new year gets under way.

Chief executive officers ranked recruitment woes as the joint top business challenge of 2024, based on surveying by KPMG.

In the 2025 update, sourcing and retaining workers had slipped to eighth place.

KPMG Australia chief executive Andrew Yates was surprised they were no longer top concerns given the historically low rates of unemployment.

The key labour market indicator fell back below four per cent to 3.9 per cent in November, defying expectations of a weaker jobs market as economic growth stalled.

“The large increase in migration during the last two years will have played a part in businesses feeling they can meet their staffing needs, and there may be some continuing hangover from the COVID era where many businesses took on additional staff and have kept them,” Mr Yates said.

Technology was front-of-mind for many business leaders, with digital transformation topping the list of 2025 challenges.

In second place was cybersecurity while concerns around artificial intelligence were in fourth place, with leaders unsure how to best leverage the new technology and manage its risks.

“Technology, AI and cyber were the issues of most relevance to our business leaders, who are increasingly joining these together as a single critical and interconnected issue,” Mr Yates said.

“Leaders are also concerned about meeting associated demands into the future, with preparing for a future skills gap in areas such as technology and data science also joint-top of the wider societal challenges impacting business.”

While inflation has been moderating, businesses are more worried about controlling cost pressures than in the previous year.

Ranked in fifth place in 2024, cost controls were equal third in the list of challenges facing businesses in 2025.

Despite interest rates staying elevated and restrictive for more than a year, underlying inflation remains above the central bank’s two-three per cent target range.

TOP BUSINESS CHALLENGES FOR 2025

*Digital transformation and optimisation and extracting organisational value from it

*Protecting and dealing with cyber risks

*Cost controls in an inflationary environment

*New technologies, including AI, and the use cases and ethics that arise when implementing it

*Dealing with evolving regulatory processes, reporting changes and impacts