A decade of decline: Small business underperformance becoming a national economic problem, CPA Australia warns

• Survey of more than 4100 businesses shows red flags for Australia’s growth, innovation and productivity
• Australia’s small business sector shows a pattern of underperformance
• Lack of young small business owners is holding Australia back

Australian small businesses continue to rank at or near the bottom of the Asia-Pacific region on growth, innovation and technology adoption, with CPA Australia warning Australia is falling further behind, highlighting the urgent need for productivity reform.

Results from CPA Australia’s 17th annual Asia-Pacific Small Business Survey shows Australia again underperforming across key indicators of small business success – with the trend showing little sign of improvement. 

CPA Australia Business and Investment Lead Gavan Ord said the findings paint a troubling picture for Australia’s economic future.

“For more than a decade, our survey has told the same story – Australia’s small businesses are consistently lagging their Asia-Pacific counterparts, and the gap is not closing,” Mr Ord said.

“When small businesses underperform year after year, it becomes a national economic problem, not just a sector issue.”

In 2025, fewer than half of Australian small businesses reported growth and they are the least optimistic in the region, with more businesses expecting the economy to contract rather than expand this year.

“This isn’t a short-term dip – it’s a persistent pattern of underperformance. Other economies in our region are adapting, investing and lifting productivity. Australia is standing still.”

Australian small businesses remain among the weakest adopters of technology in the region, and critically, few are experiencing gains from the technology they do invest in. Only 30 per cent Australian small businesses say their technology investment in 2025 improved profitability – one of the lowest results across the region.

“Technology should be lifting productivity, but many Australian small businesses are struggling to realise its benefits,” Mr Ord said.

Key survey findings where Australia ranks at (or near) the bottom:

• 44% earned more than 10% of revenue from online sales, compared to 63% average across the Asia-Pacific.
• 17% sought advice from IT consultants or specialists, compared to 27% average across the Asia-Pacific.
• 15% reported AI was the technology most heavily invested in during 2025, compared to 32% across the Asia-Pacific.
• 68% reported using social media for business purposes, compared to 88% average across the Asia-Pacific.

Mr Ord said Australia’s weak results must be viewed against a backdrop of heightened global and domestic uncertainty, which is weighing heavily on already fragile small business confidence.

“In light of the Treasurer’s warning about the economic fallout from the war in the Middle East, it’s critical that small businesses seek advice from their accountant as a first step. There may be practical options available that don’t involve taking on more tax debt or locking into lender arrangements, which can have long‑term consequences,” Mr Ord said.

“At the same time, persistent inflationary pressures at home, combined with recent interest rate rises are driving up costs and squeezing cash flow. For many small businesses, this leaves little capacity to invest, innovate or plan for growth.

“These compounding pressures help explain why Australian small businesses are among the least confident in the region and falling even further behind their Asia‑Pacific peers,” Mr Ord added.

The survey also highlights Australia’s ageing small business ownership as a crucial structural challenge, with more than half aged over 50 years of age, who are less likely to innovate, adopt new technologies or pursue growth. 

“Without stronger incentives for innovation, skills development and younger Australians becoming business owners, productivity will remain weak,” Mr Ord said.

Call for urgent government action

CPA Australia says the grim findings underline the need for urgent and decisive government action to lift small business performance as a core pillar of Australia’s productivity agenda.

CPA Australia is calling on governments to prioritise reforms that:

• Reduce regulatory (red tape) complexity and compliance costs that fall disproportionately on smaller firms
• Incentivise technology adoption and the development of stronger digital capability
• Encourage younger Australians to start a business or acquire an existing one
• Ensure policy settings support small businesses to scale and grow.

Images

Gavan Ord-27Feb25-010.jpg

Gavan Ord, Business and Investment Lead, Policy and Advocacy, CPA Australia.

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RBA interest rates decision adds pressure to government's productivity roundtable.pdf

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