Australian law firms lag peers on legal AI adoption

LEAP Legal Software has published research showing Australian law firms are trailing global peers in the use of legal-specific artificial intelligence tools, even as they place greater emphasis on productivity and profitability.

The report surveyed 700 legal professionals across Australia, New Zealand, the UK, Ireland, the US and Canada, including 219 in Australia and New Zealand. It found that 16% of Australian respondents use legal-specific AI daily or as part of core workflows, compared with 49% globally.

The findings suggest a gap between firms' focus on improving financial performance and their willingness to adopt newer tools. In Australia, 92% of legal professionals said their firms had moderate to high potential to improve profitability, while 50% said that potential had increased over the past year.

Pressure on margins also featured strongly. Some 65% of Australian respondents said profitability was now a high or top priority in business decision-making, while 66% identified client pricing expectations as a major constraint on revenue growth - the highest figure among the regions surveyed.

Tina Shergold, Head of LEAP Australia and New Zealand, said the economics of legal practice were shifting.

"The Australian legal sector is entering a phase where profitability will depend less on how much work firms win and more on how efficiently that work is delivered," Shergold said.

"Firms remain confident about growth, but pricing pressure and rising operational complexity mean productivity gains will increasingly determine how successfully firms convert demand into sustainable margins."

Adoption gap

According to the study, AI use in legal work is becoming more common in areas such as research, document review and drafting. Yet adoption in Australia remains below global averages across several measures.

While 57% of respondents globally said they regularly use integrated AI solutions, the figure was 37% in Australia. The report also found that 71% of global respondents said AI was already saving their firm a moderate to significant amount of time, compared with 50% in Australia.

Document review and analysis emerged as the leading AI use case among Australian respondents, cited by 54%. Almost half, or 49%, said AI-driven drafting and document generation would improve profitability.

Trust remains a major obstacle. Some 32% of Australian respondents reported low or no trust in AI integration, the highest level recorded across the surveyed markets.

"Our research shows that Australian firms are currently behind other markets in the adoption of legal-specific AI tools," Shergold said.

"While the caution is understandable given the importance of accuracy in legal work, firms that delay adoption too long risk missing out on the productivity gains that AI is already delivering elsewhere."

Workflow strain

The research suggests the pressure on Australian firms is not limited to pricing. Administrative workloads and limits on internal capacity are also affecting how work is handled and how revenue growth is achieved.

In Australia, 37% of respondents reported difficulty delegating work or making effective use of their teams. That points to operational constraints inside firms, even where confidence in demand for legal services remains strong.

Technology is also adding complexity in some offices rather than reducing it. The report found that 68% of Australian respondents use three or more platforms in their digital workflows, which can create duplication, slow staff training and make routine work harder to manage.

Shergold said firms were being pushed to rethink their operating models.

"Australian firms are confident about growth, but they are also operating in one of the most price-sensitive legal markets," she said.

"That combination is forcing firms to rethink how work is delegated, how teams are structured and how technology supports productivity across the practice."

Retention risks

The report also highlighted workforce issues that may weigh on firm performance. Although 61% of Australian firms said competitive salaries were a priority, retention pressures remained evident, with workload intensity and burnout continuing to affect staff stability.

Knowledge management stood out as another weak point. One-third of Australian respondents, or 33%, said their firms had no documented processes in place when staff leave, raising the risk of lost internal know-how and inconsistent service.

That is significant in a sector where legal work often depends on specialist expertise and repeatable internal processes. Firms with limited documentation may struggle to maintain output when experienced staff depart or teams are stretched.

"Many firms are operating with lean teams and limited support staff, which means experienced practitioners are carrying a large share of the administrative and knowledge burden," Shergold said. "Improving how knowledge is captured and shared within the firm is becoming increasingly important for maintaining both efficiency and service quality."

The study found Australian firms were most likely to benefit from investment in automation of repetitive workflows, document management and legal research tools. Confidence in growth remains strong, but execution on technology, productivity and knowledge-sharing will determine whether firms can protect margins under tighter pricing conditions.

The report was based on a quantitative survey of firm leaders, partners, senior practitioners and operational decision-makers across a range of firm sizes and practice areas. Respondents were drawn from six markets spanning Australia, New Zealand, North America, and the British and Irish legal sectors.