Key takeaways:

• • • Country-by-country reporting will only increase in complexity 鈥� Australia’s enhanced Country-by-country reporting (CbCR) requirements 鈥� reconciling taxes accrued against taxes credited 鈥� are a preview of where other high-scrutiny jurisdictions are heading, and companies need to build that explanatory analysis capability now, systematically, rather than scrambling later.

    • There has to be a shared narrative from corporate teams 鈥� The EU鈥檚 public CbCR is a reputational event, not just a filing. So that means tax, communications, and investor relations teams need a shared narrative before the data goes public 鈥� inconsistencies create exposure you do not want to manage reactively.

    • Rethink your filing jurisdiction in light of changes 鈥� If EU filing jurisdiction was chosen at initial implementation and never revisited, look again. Guidance has matured, and a more efficient or better-suited option may now be available.

WASHINGTON, DC 鈥� Among the many pressing topics discussed in detail at the recent , country-by-country reporting (CbCR) and its ability to reshape the corporate tax industry, certainly had its place. Between escalating local jurisdiction requirements, the , and for deeper explanatory disclosures, CbCR has quietly evolved from a transfer pricing filing obligation into something far more strategically consequential.

The floor is just the floor

The creation of the by the Organisation for Economic Co-operation and Development (OECD) was intended as a minimum standard for countries. And now jurisdictions are increasingly layering additional requirements on top of the OECD鈥檚 basic template, resulting in a widening gap between the standard requirements and what tax authorities actually want.

Currently, Australia is the most pointed example. Australian tax authorities are now requiring multinational groups to go beyond the standard CbCR data fields and provide explanatory narratives that reconcile taxes accrued against taxes actually credited. This requires corporate tax departments to bridge the gap between financial statement accruals and their organizations鈥� cash tax positions in a way that is coherent, defensible, and consistent with positions taken elsewhere.

At the TEI event, panelists explained that for tax departments this will carry complex timing differences, deferred tax positions, or significant jurisdictional mismatches between booked and cash taxes. Indeed, this additional layer of scrutiny will need dedicated attention.

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The broader signal matters: Australia will not be the last jurisdiction to move in this direction. So that means that tax departments should treat Australia’s approach as a leading indicator of where other high-scrutiny jurisdictions could be heading. Building the capability to produce this kind of explanatory analysis systematically 鈥� rather than scrambling jurisdiction by jurisdiction 鈥� would be the smarter long-term investment for corporate tax teams.

Public CbCR in the EU: The transparency ratchet has turned

For US-based multinationals with significant European operations, the EU’s public CbCR directive has fundamentally changed the calculus. Unlike the confidential tax authority filings most corporate tax departments are accustomed to, the EU鈥檚 public CbCR rules put organizations鈥� jurisdictional profit and tax data into the public domain, making it visible to investors, journalists, civil society groups, and organizations鈥� employees and customers.

The EU framework specifies which entities trigger the reporting obligation and which entity within the group is responsible for making the public filing. That scoping analysis is not always straightforward for complex multinational structures and getting it wrong could present both reputational and legal risk.

Choosing a filing jurisdiction is not purely an administrative decision 鈥� it is a choice that affects the regulatory environment that governs the disclosure, the language requirements, the timing, and the interpretive framework that applies to data.

For US-headquartered groups, the implications extend well beyond Europe. Public CbCR data is now being read alongside US disclosures, reporting on ESG activities, and public narratives about tax governance. Inconsistencies, including those technically explainable, could create unwanted noise about the company. This is clearly another reason why the tax function should partner across the business 鈥� in this case with the communications team 鈥� to make they both are aligned to tell the CbCR story instead of being caught off guard by a journalist or an investor during an earnings call.

Questions that US multinationals should be asking

Fortunately, US multinationals with multiple EU subsidiaries are not required to file public CbCR reports in every EU member state in which they have a presence. Instead, under the EU framework, a qualifying ultimate parent or standalone undertaking can satisfy the public disclosure requirement through a single filing in one EU member state, provided the relevant conditions are met. Germany and the Netherlands have emerged as two of the more popular choices for this consolidated filing approach, given their well-developed regulatory frameworks and the depth of available guidance on what compliant disclosure looks like in practice.

The strategic implication is meaningful. Choosing a filing jurisdiction is not purely an administrative decision 鈥� it is a choice that affects the regulatory environment that governs the disclosure, the language requirements, the timing, and the interpretive framework that applies to data. Corporate tax departments that defaulted to a filing jurisdiction early in the EU implementation process should take a fresh look. Regulatory guidance has matured significantly, and there may be a more efficient or better-suited path available than the one originally chosen.

The uncomfortable divergence

There is a notable irony in the current environment. Domestically, the IRS and U.S. Treasury’s 2025-2026 Priority Guidance Plan reflects an explicit focus on deregulation and burden reduction, detailing dozens of projects aimed at reducing compliance costs for US businesses. Meanwhile, the international compliance environment has moved in the opposite direction, adding disclosure layers, explanatory requirements, and public transparency obligations that many US businesses cannot avoid simply because they are headquartered in the United States.

This divergence has a direct implication for how tax departments allocate resources and make the internal case for investment in international compliance infrastructure. The burden internationally is not going down 鈥� indeed, it is intensifying 鈥� and that argument is now backed by concrete examples rather than projections.

3 things worth doing now

There are several actions that corporate tax teams should consider, including:

Audit CbCR data quality with Australia’s enhanced requirements in mind 鈥� If you cannot readily reconcile taxes accrued to taxes credited at the jurisdictional level, that gap needs to be closed before it becomes an authority inquiry.

Revisit EU filing jurisdiction strategy 鈥� If your jurisdictional decision was made at the time of initial implementation and has not been reviewed since, it is worth a fresh look before the next reporting cycle.

Develop an internal narrative around public CbCR data before it circulates externally 鈥� Your company鈥檚 tax story should not be a surprise to the corporate teams involved in communications, investor relations, or ESG 鈥� and in today鈥檚 world, assuming such news stays quiet is no longer a safe assumption.

While CbCR started as a tool for tax authorities, it today has become something more visible, more public, and more consequential than that 鈥� and that trajectory is not reversing any time soon.

You can download a full copy of the 成人VR视频 Institute鈥檚

Key takeaways:

• • • New Zealand legal market achieves revenue and profit growth 鈥� A new TRI report on the New Zealand law firm market shows firms rebounding strongly from the pandemic, with firm revenue and profits up impressively.

    • Transactional and counter-cyclical practice demand drives success 鈥� More than half of the legal demand for New Zealand law firms comes from transactional work, which rose of the past year; meanwhile, counter-cyclical practices saw even higher growth rates.

    • Managed expenses and increased partner utilisation boost profit margins 鈥� Despite rising expenses due to technology and knowledge management investments, New Zealand law firms maintained manageable costs and increased equity partner utilisation.

For New Zealand law firms, years of careful investment and strategic pandemic recovery have paid off. Today, strong demand has vaulted firm revenue growth above double digits, leading to profits not seen among New Zealand firms since the early days of the pandemic, according to a new report from the 成人VR视频 Institute (TRI) and data from TRI鈥檚 .

Jump to 鈫�

2026 Report on the State of the New Zealand Legal Market

Demand at New Zealand law firms rose more than 5% last year, following stagnant or decreasing growth rates between 2022 and 2024, according to TRI鈥檚 2026 Report on the State of the New Zealand Legal Market. As a result, overall firm revenue rose by more than 10%, placing it back near pre-pandemic levels. Coupled with managed expense growth, New Zealand law firms saw their first double-digit profit growth since 2021, after declines in demand for transactional practice work scuttled profits in 2022 and 2023.

Overall, more than half of the legal demand for New Zealand law firms comes from transactional work such as corporate general and M&A practices; and indeed, demand for such work rose last year after seeing only modest growth or declines in the the years prior. However, the report shows that even more notable is the rise of demand in counter-cyclical practices such as disputes & litigation, insurance defense, and workplace relations. The growth rate of counter-cyclical demand topped that of transactional demand in the second quarter of last year and continued to separate itself throughout the remainder of the year.

At the same time, firms continued to enjoy steady rate growth, with their worked rate growth over this past year coming close to their average rate growth than was seen from 2022 to 2024.

Interestingly, this represents a different strategy by New Zealand firms, compared to those in the United States or Australia, to capture profits through other means while keeping their rate increases manageable. And indeed, while Australian and US firms have largely seen falling utilisation, New Zealand equity partners averaged more hours worked per month in 2025 than they did the year prior, which helped to drive higher revenues.

Meanwhile, total expenses ticked up slightly last year compared with 2024, with both direct expenses and indirect expenses rising. However, much of this growth in indirect expenses is largely due to increased investments in technology and knowledge management, an increasingly necessary expense in the age of AI.

As a result of the demand rebound and more manageable expenses, New Zealand law firms are seeing their revenues and profits soar.

Overall revenue more than doubled, percentagewise, in 2025, which in turn directly led to sky-high profits in 2025 that were almost triple what they were the year prior. Profit per equity partner also saw similar gains.

Overall, New Zealand law firms on average largely held steady with a profit margin around 43%, while some firms saw profit margins soar above 50%.

As the report shows, all of this represents a very positive financial picture for New Zealand law firms. The return of demand, steady rate growth, and managed expenses has provided firms a solid footing from which to grow further. And if New Zealand law firm leaders can build on those positive metrics, they look poised to take these gains and grow further in 2026.

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a full copy of the 成人VR视频 Institute’s “2026 Report on the State of the New Zealand Legal Market” by filling out the form below:

Key findings:

• • • The market remains strong, but growth is difficult 鈥� Australian law firms are still posting solid demand and rate growth in the first half of FY 2026, yet the pace is becoming more challenging to sustain.

    • Australia is no longer a single legal market, but three distinct ones 鈥� The report identifies three clearly differentiated law firm segments: Large firms leading demand growth through aggressive investment; Big 8 firms emphasizing pricing power and cost discipline; and Midsize firms pursuing steadier, more moderate growth.

    • Early signals suggest GenAI is reshaping productivity and leverage 鈥� Changes in hours worked across seniority levels point to possible early impacts of GenAI; and while overall productivity is stable, non鈥慹quity partners and associates are logging fewer hours, while senior associates and equity partners are working more.

The Australian legal market enters the back half of FY 2026 with strong topline numbers, but beneath the surface, the market is working harder to maintain its momentum. Firms are navigating slower rate growth, shifting demand patterns, and the early tremors of what may prove to be a generative AI-driven transformation.

Solid footing, harder-won gains

Australian law firms built an impressive track record over the post-pandemic era, and the first half of FY 2026 shows that run may not be over yet 鈥� although its character is changing. Demand growth of 4.8% year-to-date sits a full percentage point above the average quarterly pace since FY 2022, according to the 成人VR视频 Institute’s just-released 2026 Australia: Midyear Legal Market Update report. Worked rates, meanwhile, rose 4.7%, which is respectable, but a noticeable step down from the 5.4% average growth firms had enjoyed since FY 2022.

At the practice level, the picture is broadly encouraging. Both transactional and counter-cyclical practice groups are accelerating, with workplace relations leading all practices at 9.9% year-to-date growth and corporate general close behind at 7.7%. However, a potential warning sign lies in the divergence among each macro-category’s flagship practice: insolvency & restructuring is surging at 7.9%, while mergers & acquisitions sits in contraction at -2.1%. If dealmaking remains subdued while restructuring activity accelerates, transactional practices could face meaningful headwinds in the quarters ahead.

Three markets, not one

Perhaps the most significant finding in this year’s report is what the market-wide averages have been concealing. Last year’s Australia State of the Legal Market report highlighted growing competition between the Big 8 and a broader group of Large law firms that were challenging the Big 8鈥檚 dominance. This year, a refined three-segment framework reveals that the former Large category was actually masking two very different stories, between Large firms and a newly identified set of Midsize firms.

The newly delineated Large firms have emerged as the clear demand leaders, posting nearly 7% year-to-date growth 鈥� roughly double their peers 鈥� fueled by aggressive investment and expansion. The Big 8, by contrast, are leaning into pricing power and cost discipline, growing demand at a more measured 2.7%. And the Midsize cohort, at 2.4% demand growth, is charting a balanced, moderate course.

The profitability divergence is even more striking. Since FY 2022, the firms now classified as Large have grown profits per lawyer by 27.4%, while Midsize firms managed just 3.1% 鈥� much closer to the Big 8’s 7.1% than to their former stablemates. What previously appeared to be a broad-based challenge to the elite was, in reality, concentrated among a smaller group of high performers that were pulling the average upward.

Early signals of AI-driven change

The report also surfaces a potentially significant development in law firm productivity. While overall hours worked per month ticked up slightly for the average qualified fee earner, the gains are unevenly distributed. Non-equity partners recorded their third consecutive productivity decline, and junior and mid-level associates are also slightly down. Yet senior associates and equity partners are logging more hours, keeping overall numbers stable. One possible explanation is GenAI 鈥� if firms are deploying these tools most heavily on research, drafting, and document review tasks that traditionally filled junior and mid-level associate hours, this is precisely the pattern we would expect to see. While it’s too early to draw solid conclusions, the distribution of hours may represent an early sign of how AI is beginning to reshape the traditional leverage model.

There is also a note of caution from firms鈥� clients. 成人VR视频 Market Insights data shows Australian general counsel growing more conservative in their spending outlook, with net spend anticipation for overall legal work dropping to 0 points. That means just as many GCs see their legal spend increasing as those that anticipating it decreasing.

Interestingly, international legal spend tells a different story 鈥� Australia-based GCs are increasingly looking outward, with the Asia-Pacific and Latin American regions emerging as areas of particular activity, while Europe has cooled. For Australian firms with cross-border ambitions, the short-term opportunity may lie to the global east and south rather than west.

Looking into the second half of the year

As the Australian legal market moves into the second half of FY 2026, the story is no longer one of uniform prosperity but rather, one of strategic differentiation. Demand remains healthy, profitability is solid, and expense discipline is improving; however, growth is no longer evenly distributed. The law firms that thrive in the quarters ahead will be those that understand which game they’re playing. In an increasingly segmented market, adaptability 鈥� not scale alone 鈥� will define success.

You can download a full copy of the 成人VR视频 Institute’s 鈥�2026 Australia: Midyear Legal Market Update鈥� report by filling out the form below:

Key points:

• • • Varied AI adoption across courts in APAC 鈥� Courts across the Asia Pacific region are at different stages of AI exploration and implementation.

    • Priority on cautious, responsible implementation 鈥� Leading jurisdictions, such as South Korea, have developed comprehensive guidance that emphasizes human responsibility and accountability.

    • Key governance recommendations for courts around the world 鈥� Successful AI integration in courts requires critical elements around transparency, training, and assessment.

As with courts in the United States, court systems across the Asia Pacific region (APAC) are facing mounting caseloads as more individuals seek self-representation without professional legal advisers, leading to increased attention on access to justice.

Not surprisingly, AI has emerged as a tool with the potential to increase the efficiency and effectiveness of the region鈥檚 judicial processes. A recent webinar hosted by the and the 成人VR视频 Institute, as part of their joint , featured the varied approaches on the use of AI in courts across APAC.

, a director in the Asia & Emerging Markets group of 成人VR视频, has an expertise on the current state of AI use in courts across the region, and he describes a spectrum of stages in adoption that included jurisdictions like Singapore, on one end, that are proactively piloting AI tools, such as generative AI (GenAI) assistants to help self-represented litigants and to summarize case materials for judges.

China鈥檚 courts, on the other hand, use a nationwide smart court system with extensive AI and big data integration, Heaphy says, adding that judges use AI tools for legal research, drafting, and error checking, but humans remain responsible for decisions. And other Asia Pacific jurisdictions like Hong Kong, Japan, and India are also actively exploring AI with a focus on governance frameworks and pilot projects that could extend to their court systems.

Different stages of court systems鈥� journeys

Many countries in the APAC region are at different stages of their AI journey, and South Korea and Australia, for example, have taken a cautious approach to AI adoption by issuing guidance to ensure responsible use and the mitigation of risks.

In South Korea, the Judicial Policy Advisory Committee, an advisory body that deliberates on judicial reform measures proposed by the Chief Justice, issued recommendations in August 2024 on AI use in judicial proceedings with a priority on underscoring principles of protecting fundamental rights and ensuring accountability and transparency, according to the , a judge on the Intellectual Property High Court of Korea. In parallel, the Association of Korean Judges for AI Studies, a research group of judges founded in 2023, published its Guidelines for the Use of AI in the Judiciary in February 2025, which further elaborates the safe use of AI by judges and litigants.

Many countries in the APAC region are at different stages of their AI journey, and South Korea and Australia, for example, have taken a cautious approach to AI adoption by issuing guidance to ensure responsible use and the mitigation of risks.

In Australia, the Supreme Court of New South Wales issued a practice note to the profession restricting the use of GenAI in drafting evidence without rigorous verification, according to , Deputy Chief Magistrate of Victoria, Australia.

While adoption of AI in courts is being driven by the goal of improving access to justice and addressing growing caseloads, each country has its own unique priorities and projects. For example, South Korea’s judiciary currently is focused on advancing AI tools for case management. 鈥淭hese include initial case analysis functions that can automatically extract key information from complaints or indictments, generate procedural checklists, predict timelines, and identify governing law,鈥� said Judge Kwon, adding that there also is an AI tool for law clerks to conduct content analysis. This tool chronologically itemizes events from the arguments of both parties in a structured, tabular or visual format, and highlights repetitive content to help judges focus on what is truly in dispute.

Conversely, Australia鈥檚 guideline-driven approach has been external looking, said Deputy Chief Magistrate Bourke, noting that Australia鈥檚 AI use is geared more 鈥渢owards external parties as compared to internally within the court. There are no current settings, as far as the court鈥檚 use of AI.鈥�

Key recommendations for courts around the globe

As courts around the world explore the integration of AI into their judicial processes, several critical initiatives that have emerged to shape responsible and effective adoption, including:

Prioritizing transparency and accountability 鈥� Comprehensive frameworks must be established that prioritize transparency and accountability. Policymakers should develop detailed guidelines that address data privacy, bias mitigation, and clear boundaries for AI applications.

Promoting continuous learning 鈥斕鼵ontinuous training programs should be established to help judicial officers and court staff understand AI capabilities and limitations while maintaining their critical oversight role in all AI-assisted workflows.

Conducting ongoing impact assessment 鈥� Focused investigation into AI’s judicial impact remains crucial, and special attention should be paid to significant challenges around accuracy, bias, and access to justice that require continued study and analysis.

Users of AI in courts need clear AI governance, opportunities for ongoing education, and an continuous evaluation of the use and performance of AI tools in order to ensure that AI best serves courts and the public.

You can find out more about the use of AI in courts here

Key findings:

• • • Large firms are disrupting the traditional hierarchy 鈥� Large firms have outpaced the Big 8 in growth and profitability by scaling aggressively and capturing market share.
    • However, geoeconomic disruption has favored the Big 8 鈥� When global conditions shifted, Big 8 firms saw a significant increase in performance as Large firms began to faulter.
    • GenAI is reshaping legal operations 鈥� Australian firms are leading globally in adoption of AI, leveraging advanced tech to boost efficiency, training, and client service.

With the end of the 2024 Australian financial year (FY 2024) in June, the market concluded one of its most dynamic years, marked by fierce competition, strategic evolution, and technological disruption.

To examine these factors more deeply, the 成人VR视频 Institute has published its , a joint publication with Melbourne Law School, which offers a comprehensive view of the evolving landscape for the Australian legal market.

Jump to 鈫�

Australia State of the Legal Market 2025

The latest report reveals a market split between two dominant groups that are taking very different approaches to the racetrack. First, the prestigious Big 8 law firms, which have traditionally found success leaning on legacy and rate strength; and second, the rapidly rising Large law firms, which were beginning to outpace the pack by pursuing aggressive growth and scaling.

At the start of the most recent leg of this race (the beginning of FY 2024), Large firms seemed likely to continue their streak of aggressive growth in which they鈥檝e been outpacing the Big 8. However, in the last couple months of the past fiscal year, conditions changed in a way that may reshape the competition for the foreseeable future.

Strong performance amid challenges

Despite strong performance across the sector, the report highlights several challenges that firms must address. For example, talent management is becoming increasingly complex as firms expand and compete for skilled professionals, with direct expenses facing sharp acceleration. For years, Australian firms have been in an aggressive growth phase, pushing to capture a veritable cornucopia of legal demand. Now, as demand growth seems to be faltering, these firms are having to grapple with tough decisions regarding the growth they鈥檙e continuing to see in headcount and expenses.

Meanwhile, the rise of generative AI (GenAI) is shifting client expectations and challenging traditional pricing models, pushing firms to rethink how they deliver and value their legal service offerings. While GenAI may well have unlocked greater capacity for these firms to provide additional value per hour, it also poses challenges to the ways firms provide services and measure productivity. Australian firms have spent significantly to digitally transform their services, but a stress test for these innovations may well be around the corner.

Looking ahead, adaptability will be critical, the report shows. Australian law firms must use the momentum of a still profitable year to sharpen their operations 鈥� from technology integration to client engagement strategies. Those firms that embrace change and align their models with evolving client needs will be best positioned to thrive in a more volatile and fast-moving legal landscape. However, those that assume the strategies of the past will continue to serve them well may find themselves left behind. Indeed, Large firms have exemplified the value of adopting change and a growth mindset since the pandemic, yet the Big 8 are now suggesting that another turning point is already underway.

Ultimately, the future of Australia鈥檚 legal market won鈥檛 be decided by size or legacy alone. How this race ends will depend on how adaptable these firms are to the changing conditions on the track.

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a full copy of the report, from the 成人VR视频 Institute and Melbourne Law School here

Jump to 鈫�

Australian Legal Market Midyear Update

Growth on top of growth

The 2024 fiscal year ended with Australian law firms increasing their profits at the fastest rate since at least FY 2015, according to the 成人VR视频 Institute鈥檚 just-released . Firm profits at these rarified heights were always going to be a challenge to replicate, but through the first half of FY 2025, Australian firms have managed to go even further, continuing to see growth on top of growth.

While there has been a bit of moderation in the pace of recent growth, the current pace 鈥� despite measuring against historically high baselines 鈥� suggests some institutional strength. Firms鈥� revenues continue to expand, and economic forecasts for Australia are largely positive. Broad-based demand growth, elevated worked rate growth, and improvements in utilisation despite rapid headcount expansion were some of the Australian legal market鈥檚 defining features in FY 2024. And so far in FY 2025, the average firm in the region has either seen a continuation of these trends or held on to the gains of last year.

However, there are some less positive developments worth mentioning as well. A major challenge relates to the variety of demand sources that are diminishing. In FY 2024, all major practice areas and office locations enjoyed one of the best demand growth years since we began tracking the region. Now, the Australian legal market is seeing several areas of demand contractions, and growth is starting to be more concentrated within a smaller number of practices and office locations.

While overall demand growth is still very strong, especially when taking the previous fiscal year鈥檚 results into consideration, the sustainability of overall growth may be slightly weaker than it was last year. That aside, the increase in worked rates among Australian firms, along with strong demand, has once again driven revenue growth significantly beyond historical averages. This is fortunate, as this continued strength has so far offset the rise many firms saw in their total expense growth.

Challenges on the horizon

Even amid these strong results, however, current challenges are growing. As said, expense growth is accelerating, driven by higher direct expenses, including larger bonus distributions, which has led to a noticeable increase in per-lawyer costs. Additionally, as also mentioned, there are concerns about the sustainability of demand growth as it becomes more concentrated among fewer practice areas and office locations.

And while the economic outlook for Australia remains mostly positive, with GDP growth projected to rebound to approximately 2% in 2025 and 2026, client sentiment regarding legal spending is mixed.

For example, the net spend anticipation (NSA) score for Australian general counsel (GCs) reflects a more cautious outlook. Interestingly, Australian GCs have expressed a more favourable sentiment towards spending on international law firms, potentially signaling added difficulties for domestic law firms which have been so successful over the last few years.

Conclusion

As the industry looks towards the latter half of FY 2025, the Australian legal market remains robust, characterised by strong overall demand and impressive profit margins. However, vigilance will be key to navigating the potential challenges ahead. With the right strategies, Australian law firms can well-position themselves to finish the year on a strong note. Yet as further difficulties emerge on the horizon, the current period of prosperity is appearing more and more transient.

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a full copy of the 成人VR视频 Institute’s here

To examine these developments more extensively, the 成人VR视频 Institute has published its , that provides critical insight into what forces are at play in the country鈥檚 legal market.

A market on the rise

The fiscal year 2024 has seen a significant increase in the demand for legal services, exhibiting an average growth rate in the total hours worked by the average law firm of 7.5%, which notably exceeds the past decade’s average of 3.5%. This growth has been broad-based, encompassing both transactional and counter-cyclical practice groups. Transactional demand led the way with an 8.5% increase, while counter-cyclical demand grew by 6.8%. Every major practice area, including banking & finance, corporate general, construction, workplace relations, and dispute resolution, has experienced growth.

Geographically, this demand surge has been widespread, with regions like Melbourne and Perth growing at more than 9% year-over-year, and Brisbane experiencing a staggering 13.7% increase in demand. Sydney, the largest market by revenue, grew by 6.7%, outpacing its 10-year average growth rate. This robust demand has been driven by strong economic fundamentals, particularly in the mining industry, which is undergoing significant reorganization and expansion.

Technological investment and innovation

In response to this surging demand, Australian law firms have significantly increased their technological investments. The advent of generative artificial intelligence (GenAI) has disrupted traditional legal practices, prompting firms to invest heavily in technology. Investment in knowledge management, which includes GenAI, grew by 6.4% per qualified fee earner (QFE) in FY 2024. However, Australian firms are still trailing their counterparts in the United States in real technology group spending, growing their investment by 2.9% above inflation compared to 4.7% in the US.

Despite this, Australian law firms have managed to control their expenses better than in previous years. Overhead expenses grew by 8.8%, but this was largely due to increased headcount. Total expenses per QFE rose by 2.6%, while revenue per QFE increased by 5.4%, resulting in a 14.1% rise in profit per lawyer QFE.

While the market’s growth is promising, it also presents several challenges. The path to full equity partnership is becoming increasingly difficult, the report shows, with the average firm hardly increasing its equity partnership totals despite an 8.3% growth in overall headcount since FY 2022. This has led to a more competitive environment for new lawyers, who now face greater competition for fewer equity partnership opportunities.

The role of GenAI

The report also illustrated how GenAI continues to be a significant disruptor in the legal industry. While many Australian legal professionals recognize its potential, there is still a sense of hesitance. According to the 成人VR视频 Institute鈥檚 recent Generative AI in Professional Services Report, 85% of Australian legal professionals believe GenAI can be applied to legal work, but only 48% think it should be. This cautious approach is reflected in the slow adoption of GenAI tools by Australian law firms, with many firms opting to be fast followers rather than early adopters.

Despite this, the potential impact of GenAI on billing practices, law firm revenue, and legal staffing is widely acknowledged.

The 2024 Australia: State of the Legal Market Report highlights a pivotal moment for the legal industry. The country鈥檚 law firms are at a crossroads, balancing the thriving demand of today with the need for strategic adaptations to rapidly approaching technological shifts. By carefully managing firm culture, promotions, and technological investments, many Australian law firm leaders can navigate their firms through these challenges and seize the opportunities presented by this new era of legal practice.

You can download the full here.

Further, businesses seem poised to increase their legal spend on outside counsel as inflation continues to cool on the Australian continent, creating possibilities for law firms in a wide variety of practice areas. All this points to a legal market that finds itself on more solid footing at the midway point of FY 2024, according to the new published by the 成人VR视频庐 Institute.

The Australian legal market appears well positioned to continue its long string of success, having seemingly fully recovered from the doldrums of early FY2023 with no signs of looking back.

Indeed, Australian law firms鈥� key performance indicators show strengths across the board. For example, demand for legal services 鈥� a measure of total billable hours worked by the average law firm 鈥� grew by an impressive 7.2% in the first half of the year compared to the same point last year. That same metric at the midyear point of FY 2023, by comparison, showed legal demand for the average firm鈥檚 services contracting by 5.0%, meaning that this year鈥檚 performance shows a remarkable swing in fortunes and further represents a continuation of a trend that started in the latter half of the prior financial year.

Interestingly, this growth in demand was driven by nearly every practice area. Dispute resolution and general corporate work accounted for more than two-thirds of all hours worked at the average firm, and grew by 9.5% and 7.5%, respectively. Even the slowest growing practice area, mergers & acquisitions, still posted a healthy 2.4% growth. (As a point of global comparison, the fastest growing practice area in the US during 2023 was bankruptcy, which posted 4.4% growth for the year, according to the recently released 2024 Report on the State of the US Legal Market from the 成人VR视频庐 Institute.)

Beside legal demand, other key performance metrics all were flashing positive signs for the Australian legal market, including strongly growth in fees worked, a measure of year-over-year growth in the product of worked hours multiplied by rates, which year-to-date in FY2024 grew an impressive 12.4%, compared to FY2023.

Future growth on the horizon

While leaders of Australia鈥檚 large law firms are likely quite proud of their achievements, and deservedly so, the question remains whether the market will continue to be favorable for Australian law firms.

Fortunately, some key indicators appear to point toward yes. In its Economic Survey of Australia, the intergovernmental Organisation for Economic Co-operation and Development (OECD) pointed out that while Australia鈥檚 economic growth may be slowing after a rapid post-pandemic recovery, its GDP growth is projected to settle around 2%, in line with the trend line before the pandemic and a signal of loftier times ahead, according to OECD numbers. The OECD also highlighted Australia鈥檚 slowing inflation, which while still high, has cooled quite a bit since its 2022 peak 鈥� another indication that Australia鈥檚 economy is returning to a more normal level.

Not surprisingly considering this landscape, corporate clients are expressing widespread optimism about their level of legal spend, indicating that spending on outside counsel will probably increase over the coming 12 months. This higher legal spend is anticipated across a wide swath of practice areas, including M&A, disputes, labor & employment, and regulatory work.

Given all this, the Australian legal market appears well positioned to continue its long string of success, having seemingly fully recovered from the doldrums of early FY2023 with no signs of looking back. And a strong finish to FY2024 will position Australian law firms well to make key investments in emerging artificial intelligence technologies which will, themselves, will likely usher in a new era for the legal industry in the very near future.

You can download the full 鈥溾�� here.

Despite a historic decline in demand during the first half of FY 2023, Australian law firms rallied on the back of a remarkable surge in demand in the year’s latter half. Bolstering this uptick were both transactional practices, typically advantaged by economic uplifts, and counter-cyclical practices, which often benefit from downturns.

At the same time, another year of historic rate growth helped many Australian law firms tread water early in the year and burst forward in the second half. While firms of different sizes faced varying challenges compared to others, the industry generally saw its profitability recover to near parity, with significant momentum going into FY 2024

To delve deeper into this, the 成人VR视频 Institute, Edge International, and ESPconnect have published , which chronicles the last financial year and looks ahead at how Australian law firms and best take advantage of their opportunities and rise to the challenges they face.

Shadows overhead

Amid this current prosperity, however, shadows of hurdles continue to lurk. Law firms were increasingly stretched, grappling with unprecedented cost pressures from both their rapid rate of expansion and their overall operations becoming more expensive. This expansion also brought about its own inefficiencies, with more lawyer capacity than there was work to go around. The challenges didn鈥檛 end there. Australian lawyers, according to a global survey, seemed to be uniquely dissatisfied when compared to their global peers, being less impressed with their firm’s reputation and notably less positive in their net promoter scores.

Indeed, the flight risk posed by standout lawyers in Australia was markedly higher than elsewhere. This poses a looming threat to the talent retention strategies of Australian law firms going forward.

Adding to the mix of challenges is the disruptive potential of generative artificial intelligence (AI). Once a niche topic, generative AI 鈥� especially on public-facing platforms like ChatGPT 鈥� is now a global phenomenon, potentially revolutionizing how law firms operate. While the exact implications remain to be fully realized, the very potential of such a technological revolution casts a looming shadow over the industry. It’s almost Damoclean in its nature 鈥� a constant reminder to law firm leaders to stay vigilant, adapt, and prepare.

To thrive in an AI-infused future, the report recommends immediate actions. Firms should seek a deep understanding of generative AI and its uniqueness, invest in appropriate technology, experiment with generative AI models, prioritize data organization, and proactively train lawyers for this new wave. Firms should also proactively consider the development of AI-centric practice areas.

The 2023 Australia: State of the Legal Market Report is more than just a summary of the past year. Firm leaders would be wise to look at it as a compass, pointing towards the future and providing law firm leaders, lawyers, and clients alike with a comprehensive outlook on the legal market. The challenges, the opportunities, and the evolving landscape make it imperative for legal professionals to be informed and prepared.

As the age-old saying goes, To be forewarned is to be forearmed. And readers of this report should take the advice to arm themselves and their firms against the shadows looming overhead even as they ready themselves for a potentially prosperous future.

You can download a full copy of here.

In the latest , published by the 成人VR视频 Institute, we see how firms continue to see lower levels of legal demand compared to the midpoint last year; yet the pace of this contraction in legal demand has slowed throughout FY 2023. While this is good news for many law firms, struggles still remain, such as the ongoing growth in expenses. However, a deeper dive into the midyear data shows that there are reasons for some cautious optimism.

Demand decline & rate growth

As the Midyear Update shows, demand for legal services began the year in negative territory, when compared against the highwater marks of FY 2022. Even though Q2 of FY 2023 saw less of a demand contraction, the midyear measurement still showed an overall decrease compared to last year, which is still concerning.

This is happening at the same time as firms see strong growth in agreed-upon rates throughout the midpoint of FY 2023. While agreed-upon rates remained in record territory for many Australian law firms, the net effect of this rate performance combined with the continued demand downturn saw firms experience essentially flat growth in fees worked for the first half of the financial year. (Fees worked reflects the year-over-year percentage change in the product of rates multiplied by billable hours in the relevant time period.)

This overall flat performance in YTD fees worked is concerning, especially as Australian law firms find themselves under increasing inflationary pressure in which low revenue growth effectively results in a net loss of buying power. Added to this mix is that many Australian law firms also saw a decrease in their billing realization rates, which saw all lawyers experiencing a declining percentage of their work being billed to clients as compared to the previous fiscal year.

Finally, growing expenses remain a constant threat to many law firms鈥� balance sheets. Compared to the beginning of the pandemic era in Q3 FY 2020, Australian law firms on average have seen their direct expenses 鈥� lawyer compensation 鈥� grow more than 20%. Indirect expenses 鈥� essentially everything else, from office rent to office supplies 鈥� declined in the early days of the pandemic due to work-from-home initiatives, but now have returned to pre-pandemic levels.

Signs of a potential rebound?

While all this may indicate a tough road through the second half of FY 2023 for many Australian law firms, the Midyear Update did contain some hopeful indicators. For example, expense growth 鈥� which hung like a heavy weight around the neck of many firms 鈥� appeared to show that it was slowing by midyear. Further, there are also strong signs that legal demand may be on a slight upswing.

On a further positive note, slightly more buyers of legal services in Australia report that they anticipate spending more over the next six months, with 31% of buyers saying they expect their legal spend to increase in that time frame. This was just slightly higher than the percentage of legal buyers who said they expect to their legal spend to decrease in the next six months. While just a slight net positive, many more buyers of legal services in the specific practice areas of regulatory, labor & employment, and disputes services said they expect their legal spend in these areas to increase as compared to those that said they expect it to decrease.

Interestingly, these spending expectations may reflect what we鈥檙e seeing in the broader economy, both in Australia and around the world. For example, increasing inflation, for all its negative impacts, can also influence larger workforce trends, leading to an increased need for legal counsel on labor & employment matters. Increased efforts by the government to stiffen regulations, too could easily result in an increased need for outside counsel.

As the Midyear Update illustrates, the remainder of the fiscal year will be a delicate balancing act for many Australian law firms as firm leaders need to keep a keen eye on levels of legal demand and rate growth, while managing their expenses (especially headcount).

While Australian law firms may be in a slightly more favorable position than many firm leaders might have thought after the dismal first quarter of FY2023, achieving success through the remainder of the year will depend on how fast, flexible, and informed their strategic decision-making will be as they continue to manage ongoing and new risks in today鈥檚 legal market.

You can download the latest here.