New research from Alon Rajic’s Small Business Loans Australia reveals 31% of businesses struggle with skilled staff shortages while 20% can’t afford productivity-boosting technology.
What’s happening: Australia’s labour productivity growth has slumped to just 0.8% annually for 2023-24, down from 1.8% two decades ago, according to Productivity Commission data.
Why this matters: With businesses working harder but producing less, and one in five unable to afford productivity-boosting technology, Australia’s economic competitiveness faces serious headwinds.
Australia’s productivity crisis has moved from economic data to the business frontline, where companies are struggling under the weight of labour shortages, rising costs and technological gaps that are strangling efficiency.
Small Business Loans Australia has released findings from a nationally representative survey of 226 business owners and decision-makers, revealing the specific challenges cutting into productivity across the country. The results paint a picture of businesses ready to innovate but constrained by circumstances largely beyond their control.
People are the problem
Almost one third of businesses identify difficulty finding skilled staff as their primary productivity barrier. When companies can’t recruit people who are job-ready, existing employees shoulder the burden, slowing decision-making, output and customer delivery.
The engagement crisis compounds the skills shortage. One quarter of businesses report low staff engagement is reducing output per hour worked. The Productivity Commission’s latest bulletin shows labour productivity declined by 0.5% in the September quarter and by 0.8% over the year, suggesting the problem has intensified throughout 2024.
Alon Rajic, founder of Small Business Loans Australia, says: “Our research shows that people are key to Australia’s productivity problem. They’re working harder with fewer resources, while businesses struggle to source the people, stock and technology to grow.”
Supply chains add another layer of complexity. An equal 20% of businesses cite supply and stock delays alongside drops in customer demand as productivity drags, creating a double impact on their output capacity.
Technology remains out of reach
Financial constraints create a vicious cycle. One in five businesses say they cannot afford or are not investing in the technology and equipment that would lift productivity. Without the right people, reliable supplies and healthy sales, many businesses simply lack the capital to invest in efficiency-improving tools.
The survey breaks down differently across business sizes. Micro-businesses with one to 10 employees face the most acute skills shortages, at 60%. Large businesses with more than 200 employees report higher rates of staff turnover (38%), low engagement (36%) and inefficient internal processes (33%).
Geography matters too. The Australian Capital Territory leads the nation for difficulty finding skilled staff at 60%, likely reflecting competition with the Federal Government for workers. Queensland businesses struggle most with supply delays (32%), while South Australian businesses cite rising red tape (26%) at double the rate of New South Wales.
What would actually help
When asked what would most improve productivity, more than one third of businesses (38%) identified affordable access to new technology as the top priority. This includes automation tools, faster systems and cloud-based platforms, but the upfront costs and uncertainty about returns create barriers to adoption.
A similar proportion (36%) want government to cut red tape and introduce stronger productivity incentives. Businesses want less paperwork, simpler compliance and the freedom to focus on core operations rather than regulatory requirements.
Training emerges as a critical need. Nearly one in three businesses (29%) say learning how to use AI and digital tools effectively would boost productivity. The message is clear: technology alone isn’t enough without the skills to deploy it properly.
Access to finance and skilled labour each matter to one in four businesses (24%), while 23% cite flexible workplace laws and ongoing staff training as essential. More than a quarter (27%) believe stronger economic conditions would naturally lift productivity.
Rajic said: “Businesses will do their part to lift productivity, but they need industry and Government to make it easier, not harder. Running a business is becoming increasingly challenging, and businesses are telling us they need the right regulatory environment and access to skilled talent and affordable technology to remain competitive.”
Red tape weighs heavy
The Productivity Commission has found that labour productivity fell by 3.7% in 2022-23 as record increases in hours worked outpaced output growth. Australians are working longer and harder, but producing less per hour, a pattern the business sector is experiencing acutely.
The regulatory burden falls heavily on smaller businesses, which often lack dedicated compliance teams or the scale to absorb administrative costs. As businesses grow from micro to medium size, their productivity challenges shift from survival to management complexity.
Large businesses show the strongest appetite for both technology access (50%) and regulatory reform (50%). Micro businesses prioritise AI training and workplace flexibility (67%), suggesting labour-intensive tasks and rigid employment laws constrain their efficiency most severely.
The full Small Business Loans Australia productivity study, including detailed breakdowns by business size, state and industry, is available at smallbusinessloansaustralia.com.
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