Australian businesses are rethinking how they spend; shifting from big-ticket buys to smarter, lower-risk investments that deliver faster returns.
Australian businesses are making a strategic pivot in 2025, moving away from big-ticket capital purchases toward investments that deliver immediate returns with lower financial risk.
New data reveals a clear pattern: when times are tight, smart businesses invest in people, technology, and efficiency rather than expensive machinery.
A comprehensive survey by Small Business Loans Australia (SBLA) of 200 business owners and decision-makers shows that 91% of businesses are planning non-capital investments this financial year – focusing on areas that can drive immediate efficiency, sales, and growth without breaking the bank.
The numbers tell the story
The shift is backed by hard data. The Australian Bureau of Statistics shows private capital expenditure fell by 0.1% in the March quarter of 2025, driven by a 1.3% drop in plant and machinery investment. Year-on-year, capital investment is now 0.5% lower than March 2024.
But this isn’t a story of businesses pulling back entirely. Instead, it’s about strategic reallocation. Businesses are still forecasting a healthy $155.9 billion in capital investment this financial year – they’re just being smarter about where that money goes.
The most telling finding? Businesses are prioritizing human capital above all else. Employee upskilling tops the priority list at 35% of businesses, closely followed by new hires at 31%. This represents a fundamental shift in thinking: rather than buying new equipment, businesses are investing in making their existing workforce more capable and productive.
“Business owners are making hard decisions about where to allocate limited funds – and our research shows there is a clear preference for investment that drives efficiency, customer acquisition and workforce capability,” says Alon Rajic, founder of Small Business Loans Australia.
This people-first approach makes financial sense. Training existing employees costs less than recruiting new ones, and skilled workers can often achieve more with existing equipment than untrained workers can with new machinery.
Tech takes center stage
When businesses do invest in capital, technology dominates the wishlist. Technology and IT hardware lead capital investment plans at 38% of businesses – a clear signal that digital transformation remains a priority even in challenging economic conditions.
This preference for tech investment reflects its dual benefits: immediate operational improvements and long-term competitive advantages. Unlike heavy machinery that may take years to pay for itself, technology investments often deliver measurable efficiency gains within months.
One of the most interesting findings is the 28% of businesses planning to invest in office furniture and fittings – the second-highest capital investment category. This suggests a significant push to end work-from-home arrangements and bring employees back to physical workspaces.
The investment in office enhancements indicates businesses believe the benefits of in-person collaboration outweigh the costs of upgrading workspaces. It’s a bet on productivity and company culture that many businesses are willing to make even in tight financial times.
The constraint reality check
The survey reveals the harsh realities driving these strategic choices. The biggest internal barriers to capital investment are:
- Tight profit margins (43% of businesses)
- Insufficient cash flow (26%)
- Prioritizing debt repayments (17%)
These constraints explain why businesses are choosing lower-risk investments with faster payback periods. When margins are tight, every dollar spent must deliver clear, measurable returns.
Beyond internal financial constraints, external factors are heavily influencing investment decisions:
- High energy costs (30% of businesses)
- Rising interest rates (24%)
- Economic uncertainty (22%)
These macro-level pressures reinforce the logic of choosing investments that improve efficiency and reduce operating costs rather than expanding production capacity.
Beyond people and technology, businesses are strategically investing in growth areas:
- Product or service development (23%)
- Marketing and advertising (22%)
- Customer experience enhancements (16%)
This mix shows businesses aren’t just cutting costs – they’re investing in areas that can drive revenue growth and customer retention. The focus on marketing and customer experience suggests confidence in their ability to compete, even in challenging conditions.
The selective approach
Perhaps most significantly, businesses are avoiding the traditional big-ticket capital purchases that defined previous investment cycles. Only 22% plan to invest in machinery and equipment, and just 13% in motor vehicles. These larger purchases require more financing and longer-term certainty – luxuries many businesses can’t afford in the current environment.
The exception is sustainable assets, with 10% of businesses planning these investments. This likely reflects both energy efficiency benefits and compliance requirements – investments that pay for themselves through reduced operating costs.
This shift toward lower-risk, higher-return investments could actually benefit the broader economy. Businesses investing in people and technology are building capabilities that can drive productivity growth and competitiveness over the long term.
Rajic notes: “The good news is that businesses aren’t necessarily slowing down – they’re choosing those investments that have faster returns and lower risk. Businesses are making more selective and considered decisions about how they’ll grow this financial year.”
For business owners, the message is clear: in uncertain times, the smartest investments are those that:
- Build capability rather than capacity – investing in people and skills
- Deliver immediate returns – technology and efficiency improvements
- Reduce operating costs – sustainable assets and energy efficiency
- Enhance competitiveness – marketing and customer experience
The businesses thriving in 2025 aren’t necessarily those with the biggest budgets, but those making the smartest allocation decisions. By prioritizing people, technology, and efficiency over expensive equipment, they’re positioning themselves to emerge stronger when economic conditions improve.
The data suggests Australian businesses have learned from previous economic cycles: when resources are constrained, invest in what delivers the fastest, most measurable returns. In 2025, that means putting people before profits – and watching both improve as a result.
The full Small Business Loans Australia FY26 capital investment study can be found here.
Keep up to date with our stories on LinkedIn, Twitter, Facebook and Instagram.
