CreditorWatch’s survey uncovers stark sectoral divides reshaping Australia’s business landscape in 2026.
What’s happening: Rising costs constrain 72% of businesses, whilst 83% report significant changes in customer behaviour including slower approvals, tighter budgets and longer payment terms.
Why this matters: Younger businesses under five years old are driving expansion momentum, whilst traditional sectors like construction face genuine headwinds. The divergence between headline optimism and operational caution suggests businesses are distinguishing between longer-term belief in Australia’s economy and near-term investment discipline.
When asked about their outlook, most Australian business leaders project confidence. Three in four are optimistic about growth over the next year. Yet beneath that headline optimism lies a more complex decision-making process: 63% of business decision-makers are postponing major investments until conditions improve.
This is not pessimism. It is pragmatism. “Business leaders are demonstrating remarkable adaptability in a challenging environment. It’s encouraging to see how many continue to feel positive about the Australian economy over the next year and how many are identifying positive indicators within their own operations,” said Patrick Coghlan, CreditorWatch CEO, commenting on the survey of more than 1,000 business leaders.
“While leaders are pacing major expenditure, they’re certainly not standing still. They’re finding opportunities to innovate, expand and deliver value for their customers even as conditions fluctuate,” Coghlan adds.
The constraint is real. Rising costs are inhibiting growth for 72% of businesses surveyed. When asked about workforce decisions, more than four in ten (43%) do not plan to hire in the next 12 months. Among those expecting to recruit, two-thirds favour casual or short-term contractors over permanent employees, a shift that reflects caution about long-term labour cost commitments.
Yet investment intentions remain surprisingly robust. More than eight in ten respondents (82%) plan to invest over the coming year, with technology leading at 40%, followed by marketing and customer acquisition at 29%, and new products and services at 26%. Businesses are not retreating. They are redirecting capital toward measurable returns rather than speculative expansion.
Customer Behaviour Is Shifting Dramatically
One factor driving this defensiveness is unmistakable: customer behaviour has changed markedly. Eight-three per cent of business leaders report changes over the past year. The nature of those shifts is revealing: slower approval processes, tighter customer budgets, longer payment terms, and increased price comparison.
This is not a cyclical dip. It reflects structural adjustment in how customers engage with suppliers. Longer payment terms create cash flow drag. Increased price comparison puts pressure on margins. Slower approvals delay revenue recognition and complicate forecasting.
For businesses dependent on rapid cash conversion cycles (such as wholesale distribution, hospitality providers, or service providers working on retainer), these shifts have material implications. The survey suggests that customers themselves are managing cash more carefully, protecting their own liquidity by extending payables to suppliers.
This dynamic flows into recruitment decisions. If customers are tightening budgets and extending payment terms, businesses cannot confidently hire permanent staff. Casual and short-term contracting offers flexibility. It allows businesses to scale headcount with actual demand rather than forecast demand.
The regional picture amplifies this story. Customer behaviour changes are most pronounced in smaller markets. Tasmania, Northern Territory and Australian Capital Territory reported 92% noting customer behaviour shifts, compared with 83% in New South Wales, 84% in Victoria, and 79% in Queensland. Smaller regions face more volatile customer bases and less diversified demand, making customer behaviour shifts more acute.
Younger Businesses Drive Momentum
A striking divergence emerges when comparing business age cohorts. Organisations less than five years old are driving much of the expansion momentum. Eighty-four per cent of younger businesses are seeking local growth opportunities, compared with just 65% of businesses more than 20 years old.
This reflects two dynamics. First, younger businesses typically operate in higher-growth sectors like technology, professional services and digital commerce. Second, they have not yet built the cost and operational infrastructure of mature enterprises, allowing greater agility in reallocating capital toward growth.
More than half of all business leaders (same proportion across age groups) are actively exploring domestic expansion. Whilst 54% are considering overseas markets, younger businesses lead this international ambition. For mature businesses, the calculus is different. They have existing market positions to defend and complex operational infrastructure to maintain. Growth comes through defending market share and operational efficiency rather than geographic expansion.
Construction Remains Most Cautious
Sectoral divergence is stark. Financial and Insurance Services leaders are the most optimistic, with 89% expressing confidence about business growth over the next 12 months. They are also most expansion-focused, with 87% pursuing local growth (versus 76% average) and 73% considering international markets (versus 54% average). Notably, they are least likely to delay major investment, with only 56% postponing capital expenditure compared with 63% overall.
Construction businesses, by contrast, remain the most cautious. Only 67% are optimistic about their business growth, the lowest proportion across all sectors surveyed. Leaders in construction are also among the most likely to say rising costs are affecting their growth (74% versus 72% average) and among the least likely to explore local expansion (71% versus 76% average).
This divergence is material. Australia has experienced significant construction activity in recent years, driven by infrastructure spending, housing investment, and public sector projects. Yet rising labour costs, materials inflation, skills shortages, and client budget caution are weighing on confidence. When combined with extended customer payment terms, many construction businesses face genuine cash flow pressure.
Financial services, by contrast, benefit from higher structural margins, capital access, and customer demand that remains relatively resilient regardless of economic cycles. Insurance and superannuation businesses provide essential services with recurring revenue characteristics that stabilise confidence.
Regional Dynamics Shift Strategy
The geography of confidence varies markedly. Positivity is strong nationally, with 76% expressing growth optimism overall. However, perspectives differ across states and territories.
Hiring intentions sit at around 60% nationally, peaking in Tasmania, Northern Territory and Australian Capital Territory at 68%. Queensland records the weakest hiring intentions at below 60%, consistent with broader employment market softening evident in SEEK data where Queensland job ads fell the least month-on-month.
Local expansion appetite is strongest in the smaller territories at 83%, and lowest in Queensland at 68%. This likely reflects Queensland’s relative labour market resilience and existing capacity, reducing the need for geographic expansion to find growth.
Cost pressures show the highest agreement in Tasmania, Northern Territory and Australian Capital Territory at 86%, and the lowest in Queensland at 67%, again suggesting Queensland businesses are experiencing less acute cost inflation pressures than southern jurisdictions.
Investment delays are most common in the smaller territories at 69%, Western Australia at 68%, and South Australia at 67%. These regions face compounded pressures from customer behaviour shifts (most pronounced in smaller markets) combined with local cost inflation.
“The regional differences in this survey make it clear that a one size fits all approach won’t work,” Coghlan said. “From Queensland to Western Australia, every market has its own dynamics. Sustainable growth depends on understanding and supporting these local realities.”
The Paradox Explained
What emerges from the CreditorWatch data is not contradiction but accurate reflection of business reality in early 2026. Australian business leaders are simultaneously optimistic about longer-term opportunities and cautious about near-term capital deployment. They are investing in areas with clear measurable return (technology, marketing) whilst deferring speculative expansion.
Rising costs and changing customer behaviour have created a new baseline for business planning. Permanent hiring gives way to contractor flexibility. Domestic expansion takes priority over international markets. Technology investment leads, infrastructure investment waits.
Yet the fact that 76% remain optimistic despite these headwinds suggests business leaders believe conditions will improve. They are not preparing for contraction. They are preparing for transition. The investment pause is tactical, not strategic. The hiring caution is about flexibility, not decline.
In a labour market that is softening, an economy facing productivity headwinds, and a geopolitical environment characterised by trade uncertainty, this pragmatic optimism may be precisely what Australian business needs to navigate 2026.
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