Australia’s legal sector entered 2026 with strong expectations for team growth, sustained workloads and continued demand across transaction-led practice areas. While economic uncertainty remains a concern, many legal teams are still managing active pipelines and responding to clients who expect matters to progress faster, with greater commercial awareness and more flexible resourcing.
The nature of legal work is also changing. Technology is shortening transaction timelines, clients are asking more questions about artificial intelligence, and lawyers are being required to combine traditional legal expertise with a stronger understanding of operational risk. Legal teams must now deliver accurate advice quickly while also helping businesses prepare for emerging commercial, regulatory and geopolitical challenges.
These conditions are creating opportunities for legal professionals who can adapt. Technical ability remains essential, but commercial judgement, communication skills and the ability to assess technology-generated material are becoming increasingly important.
“Transactions are moving faster than ever before, and this is mostly attributable to the legal industry’s adoption and use of technology.”
On a recent Australian Market Update, Legal Recruitment Manager Kirsten Garrett was joined by Special Counsel in Corporate and M&A Jarrod Tucker from Thomsons to discuss current legal market conditions, the growing influence of AI and the trends likely to shape the profession through the remainder of 2026 and into 2027.
The first half of 2026 has demonstrated that demand remains healthy across several areas of the Australian legal market. Jarrod described a strong start to the year, with demand coming from both existing and new clients across multiple practice groups.
Within corporate and M&A, the market has remained particularly active. A steady flow of transactions valued between $50 million and $200 million has supported strong workloads and created continued demand for experienced legal professionals.
Although concerns remain about a potential slowdown later in the year, the legal sector has not yet experienced a significant decline in activity. Economic changes often affect other industries before they begin to influence demand for legal services. Legal teams may therefore continue operating at high capacity even when broader market confidence begins to soften.
One of the clearest changes affecting legal teams is the increasing speed of transactions. AI is contributing to this shift, but it is not the only factor. Portable technology, video conferencing and improved digital collaboration have also made it easier for clients, advisers and counterparties to progress matters quickly.
Faster transactions place additional pressure on legal teams. Businesses need access to the right expertise at short notice, and firms must be able to adjust their resourcing levels depending on the size and complexity of each matter.
Jarrod explained that an effective model is to maintain a core transaction team supported by additional resources when required. This allows legal teams to increase capacity quickly while maintaining the attention to detail and due diligence needed for high-value matters.
For employers, this highlights the value of flexible workforce planning. Permanent hiring remains important, but temporary, contract and project-based legal professionals may also help teams manage sudden workload increases without creating long-term resourcing pressure.
Despite the rapid adoption of new technology, the foundations of strong legal performance have not changed. Technical legal knowledge, commercial acumen and clear communication remain central to success.
What is changing is how these skills are applied. Lawyers must now review information produced through new tools and determine whether it is accurate, commercially appropriate and legally fit for purpose.
A particularly important capability is the ability to identify documents that may have been drafted using general generative AI tools. These drafts can appear polished while failing to reflect the actual commercial agreement between the parties.
Lawyers who can recognise artificial drafting, identify weaknesses and align documents with the intended transaction will become increasingly valuable. AI literacy is therefore not simply the ability to use a tool. It also involves understanding its limitations and knowing when human legal judgement must take priority.
The influence of AI extends beyond document drafting. Clients are increasingly asking legal advisers how AI can be implemented responsibly within their own organisations.
This is expanding the role of legal teams. Rather than responding only to traditional legal questions, lawyers are helping businesses develop governance frameworks, identify suitable use cases and create clear guidelines for employees.
One growing area is the development of AI playbooks. These documents can establish approved tools, review processes, privacy expectations and standards for checking AI-generated outputs. They can also help organisations achieve more consistent results while reducing legal, commercial and reputational risks.
For law firms and in-house teams, the ability to provide practical AI guidance may become an important point of difference. Clients are not only looking for information about what AI can do. They also need advice on how to use it safely and effectively.
AI can help legal professionals work through information quickly, improve efficiency and reduce the time spent on repetitive tasks. However, speed alone does not guarantee quality.
A document produced in minutes may still require significant legal review. An automated output may overlook commercial context, misunderstand the relationship between parties or present information confidently despite containing inaccuracies.
The real value of AI will depend on how it is used. When combined with strong legal expertise, commercial awareness and careful oversight, it can support better outcomes. When used without appropriate review, it may simply allow mistakes to be produced faster.
The question for legal teams is therefore not whether AI should be adopted. It is how the technology can be integrated without weakening the quality, accuracy and judgement clients expect.
Beyond AI, economic and geopolitical uncertainty is encouraging businesses to review how their contracts address unexpected events.
Clients are paying closer attention to low-probability but high-impact risks, including pricing shocks, supply chain disruption and supplier insolvency. This is leading to renewed interest in contractual protections, contingency planning and pricing mechanisms.
Force majeure provisions, supplier obligations and flexible pricing clauses may receive greater scrutiny as organisations prepare for market instability. Legal teams will need to work closely with commercial leaders to ensure that contracts reflect operational realities rather than relying on standard wording.
This creates an opportunity for lawyers with strong commercial understanding. The most effective legal professionals will not simply identify risk. They will help businesses evaluate the likelihood and potential impact of that risk and develop practical responses.
Legal teams preparing for the next stage of the market should consider the following:
• Build flexible resourcing models that allow teams to increase or reduce capacity as workloads change.
• Invest in AI literacy so lawyers can assess technology-generated documents and identify material risks.
• Maintain a strong focus on technical expertise, commercial judgement and communication.
• Develop clear AI playbooks covering approved tools, review requirements, privacy and accountability.
• Review contracts for exposure to pricing shocks, supplier insolvency and geopolitical disruption.
• Strengthen collaboration between legal, commercial, technology and operational teams.
