Australian small business owners are pushing through tough economic pressures, yet many hold onto hope for better times ahead. A fresh report from the Council of Small Business Organisations Australia and CommBank, released on October 27, 2025, shows rising costs and stress testing their limits, but optimism and tools like AI offer a path forward.
Key Challenges Hitting Profits and Owners
Small businesses across Australia face a wave of hurdles that cut into their earnings and personal lives. The 2025 Small Business Perspectives Report highlights how these issues build up over time.
Rising costs top the list, with 72 percent of owners calling them the biggest block to growth. Energy bills, supplies, and wages have jumped, leaving many unable to expand or even maintain operations.
Profits have taken a big hit too. About 64 percent reported lower earnings than last year, up from 40 percent in 2024. This drop forces tough choices, like cutting staff hours or delaying investments.
Owners often bear the brunt personally. Sixty percent could not pay themselves at times, and a quarter regularly use personal savings to keep the business running. This financial strain adds to daily worries.
Compliance tasks eat up time and money. Business owners spend over six hours a week on regulations, ranking it among their top five expenses. Many say this red tape slows innovation and adds unnecessary stress.
Mental Health Toll and Workforce Struggles
The pressures do not stop at finances; they affect well-being and hiring too. The report paints a picture of owners stretched thin.
Stress and burnout are widespread. Seventy-six percent felt stress or anxiety, while 57 percent dealt with burnout. These issues stem from long hours and constant uncertainty in a changing economy.
Workforce shortages make things harder. High wage demands and skill gaps leave positions unfilled, limiting growth. Owners report spending more time on recruitment than on business strategy.
- Many turn to flexible work options to attract talent.
- Training programs help, but costs add another layer of expense.
- Some owners take on multiple roles to fill gaps.
Despite these strains, community ties keep many going. Owners value the purpose and independence their businesses bring, even in hard times.
Signs of Optimism Amid the Strain
Not all news is grim; the report shows cautious hope for the future. Small business owners are adapting and looking ahead.
Forty-five percent expect customer demand to rise in the next year. Lower interest rates could boost spending, helping sales recover.
Sixty-three percent are happy with their choice to start a business. Motivators like community impact and control over their work fuel this satisfaction.
Innovation plays a role too. Digital tools and changes in operations help some stay competitive.
| Optimism Factors | Percentage of Owners |
|---|---|
| Satisfied with starting business | 63% |
| Expect improved customer demand | 45% |
| See AI as helpful | 46% |
| Anticipate cost increases | 73% |
This table captures the mix of hope and ongoing worries from the report.
Role of AI and Tech in Building Resilience
Technology offers a lifeline for many small businesses facing these challenges. The report notes early gains from new tools.
AI has improved efficiency for 46 percent of users. It helps with tasks like inventory management and customer service, saving time and money.
Adoption is growing, especially in sectors like retail and services. Owners who invest in tech report better handling of costs and competition.
However, barriers remain. Not all businesses have the skills or funds to start. The report calls for more support in digital training.
Energy transition and sustainable practices also tie into tech. Some owners use AI to cut energy use, addressing rising bills.
Calls for Policy Support and Future Outlook
Leaders in the sector urge action to ease burdens and spark growth. The report suggests targeted changes could make a difference.
Fairer taxes and less red tape top the wish list. Skills programs and digital investments could help businesses thrive.
Matthew Addison, Cosboa chair, noted the sector’s resilience but stressed the need for better support. He pointed to owners innovating despite odds.
Rebecca Warren from CommBank echoed this, highlighting commitment to staff and communities. She sees confidence building with economic shifts.
Recent events, like the drop in interest rates in mid-2025, align with this outlook. Combined with global trends toward AI adoption, Australian small businesses could rebound stronger.
The report ties into broader 2025 trends, such as inflation easing but costs lingering from supply chain issues. Compared to 2024, when 90 percent faced cost hikes, this year shows slight relief in some areas.
Adapting for Long-Term Success
Small businesses are not just surviving; many are pivoting to new strategies. From online sales to eco-friendly products, adaptation is key.
Experts recommend focusing on cash flow and mental health support. Simple steps like budgeting tools or peer networks can make a real difference.
Looking ahead, the sector’s ability to innovate amid challenges could drive Australia’s economy. With the right backing, optimism might turn into real growth.
Share your thoughts on how small businesses in your area are coping. Have you seen similar challenges or successes? Comment below and spread this article to help others stay informed.
