Australia’s small business backbone drives 32% of GDP. Yet many are flying blind online, struggling to keep up with tech-savvy corporate giants.
What’s happening: Small and medium enterprises representing 97% of Australian businesses are falling behind in digital transformation, with only 28% using AI compared to 90% of large businesses, creating a widening productivity gap.
Why this matters: SMEs contribute 32% of Australia’s GDP and employ 5 million people, but systemic barriers around cost, complexity, and knowledge are limiting their growth potential and the nation’s economic productivity.
Australia’s digital economy is charging ahead, but there’s a problem: the businesses that form the backbone of our economy are being left behind.
According to Simeon Duncan, Senior Manager of Corporate Affairs & Public Policy at Intuit APAC, small and medium businesses face an urgent productivity challenge. While large enterprises race ahead with artificial intelligence, automation, and cloud tools, many smaller businesses remain stuck with outdated systems and manual processes.
The numbers reveal a stark divide. Research shows that as of April 2025, only 28% of small businesses were using AI – a 13% increase since July 2024. Meanwhile, the NSW Government estimates nearly 90% of large businesses are already leveraging the technology.
The backbone businesses getting squeezed
Small and medium businesses represent more than 97% of all Australian businesses, according to the National Small Business Strategy. They contribute over 32% of GDP and employ close to 5 million people, making them essential to the economy.
Yet without dedicated IT teams or technology investment budgets, SMBs face significant digital disadvantages. Software licences, integration costs, and subscriptions often seem prohibitively expensive, especially when returns aren’t immediately clear.
“Business owners are time poor, and the idea of exploring new tools often falls to the bottom of the list,” Duncan explains. “Many do not know where to begin or who to trust for advice.”
Recent trends show that while experts predict significant shifts for small businesses in 2025, many are still grappling with fundamental digital transformation challenges.
The 12-hour productivity breakthrough
The benefits of embracing digital tools are substantial. Recent research shows that automated workflows and AI-powered agents have dramatically increased productivity for small and mid-size enterprises.
These AI systems handle invoicing, payments, reconciliation, and customer relationship management, saving business owners up to 12 hours every month – a benefit reported by 45% of users. Over three-quarters (78%) of users say these AI solutions make running their business easier, while 68% report that automation allows them to spend more time on growth initiatives.
AI-powered tools help predict late payments, automate invoice reminders, and generate real-time cash flow insights, enabling businesses to optimise working capital and avoid financial surprises.
Policy reform as the solution
Duncan argues that government support can change this trajectory through inclusive digital policy reform that levels the playing field.
This includes providing training tailored specifically to small business operators and their teams, delivered through partnerships with industry associations. Sessions could focus on practical skills like using AI to forecast cash flow or automating invoicing and payroll.
The reform agenda also encompasses expanding grants, tax credits, or subsidies for investments in digital tools and cybersecurity. “Small businesses need real financial support to overcome upfront costs and make confident investments,” Duncan notes.
Additional priorities include expanding the Consumer Data Right to cover more datasets relevant to SMBs, enabling smarter financial tools and better business insights. Embedding digital readiness into government procurement would incentivise small businesses to modernise while creating more contract opportunities.
The challenge isn’t reluctance or lack of desire to engage with emerging technologies. Instead, SMBs face systemic barriers including cost constraints, technological complexity, and uncertainty about where to start.
Small business sales growth has hit a four-year low, yet four in five businesses surveyed remain positive about the future despite current headwinds and challenging conditions.
The fragmented nature of tax and compliance systems hits small businesses hardest, draining time and mental resources that could be invested in innovation. These businesses need practical support to navigate the digital transformation landscape effectively.
The 2030 vision
Australia has a unique opportunity to reboot how it supports SMBs through digital transformation. By 2030, Duncan envisions every small business equipped with the knowledge, tools, and support to thrive in the digital economy.
“When small businesses succeed, Australia succeeds,” he emphasises. “Now is the time to invest in inclusive policies that close the divide and unlock the full productivity potential of our economy.”
Achieving this goal requires coordinated efforts between industry and government, focusing on practical solutions that address the real barriers facing Australia’s small business community. The stakes are high: without intervention, the digital divide risks leaving millions of workers and thousands of businesses behind in an increasingly automated economy.
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