The new financial year opens amid geopolitical tensions, a tariff war and an uncertain economic landscape that makes planning difficult. 

The Reserve Bank of Australia (RBA) says these developments could hurt global economic activity, particularly if households and businesses delay expenditure until there is greater clarity on the outlook.  

The good news is that inflation and interest rates are easing. The RBA lowered the cash rate target by 25 basis points to 3.85% in May and says inflation has fallen substantially since its peak in 2022. The Australian Bureau of Statistics (ABS) confirmed this, revealing that annual CPI inflation fell from 2.4% in April to 2.1% in May. 

Many small businesses, operating on thin margins, are struggling to make a profit but there’s ways to respond and unlock growth this coming year. 

Harness technology

Adopting new technologies to automate admin tasks and invoice customers will help small businesses reduce costs and improve productivity.  

CPA Australia’s 16th annual Asia-Pacific small business survey finds that high-growth small businesses are significantly more likely to sell online, receive payments through new payment technologies, review their cybersecurity protections and leverage social media for customer engagement. 

Cloud computing can also help SMEs scale without huge infrastructure costs. Instead of investing in expensive hardware, cloud platforms provide access to computing power, storage and software on demand. Migrating critical operations such as data storage, email and collaboration tools to the cloud not only saves costs but also enhances security and flexibility. 

Elsewhere, insurance comparison site BizCover says the use of artificial intelligence (AI) has shifted from “nice-to-have” to “must-have” for small businesses. It found that 80% are either using or planning to adopt AI, especially in areas such as problem-solving, marketing and client communication. Nearly half view AI as important to daily operations while 14% consider it essential.

Learn from others

The CPA Australia survey reveals some other common characteristics of high-growth small businesses that other businesses can emulate. They are more: 

  • Focused on the customer experience. 
  • More innovative in introducing new products, services, or processes. 
  • Likely to expect cyberattacks. 
  • Focused on entering new markets and growing export revenue. 
  • Inclined to seek professional advice, especially from IT and business consultants.  
  • Open to taking calculated risks in line with their long-term vision

Review employment cost base

With productivity tools in place, the next step is managing rising employment costs – a growing pressure for many small businesses, with the national minimum wage and minimum award wages having increased by 3.5% from 1 July 2025. 

Council of Small Business Organisations Australia’s CEO Luke Achterstraat notes: “For every dollar increase in the award rate, employers also face higher levels of workers’ compensation, payroll tax and of course, another legislated increase in the superannuation guarantee from 1 July.” He says that’s on top of a cost crisis in energy, rent, insurance and input costs.  

Supporting this view, ScotPac’s SME Growth Index for April 2025 found that there was near-unanimous agreement among Australian SMEs that legislated increases in employment costs are negatively affecting cash flow.  

In these circumstances, small businesses are advised to monitor their expenses carefully and look for opportunities to reduce costs.  

ScotPac says small and medium-sized enterprises (SMEs) are actively exploring alternatives to hiring new employees, with almost half increasingly using contractors to combat higher wages. A further 15% are outsourcing more services. Almost 20% have trimmed their capital expansion plans and around 13% have reduced employee hours or headcount.

Understand cashflow and review finance options

Looking ahead, 95% of SMEs told ScotPac that further wages and super rises will negatively (56%) or severely negatively (39%) affect their available working capital.  

Given these conditions, businesses are advised to understand their cash flow patterns and use this information for planning, budgeting and resource allocation. Planning for best- and worst-case financial outcomes will help them be more prepared for the unexpected.  

They could also try to renegotiate supplier and finance agreements to lock in more favourable terms. Smarter invoicing tactics will help them get paid faster.  

In addition, now is a good time to review financing and lender options, especially as interest rates begin to ease. Solutions such as Invoice Finance, Trade Finance or short-term Business Loans can help ease day-to-day pressures and provide the headroom needed to invest in growth. 

Summary

The new financial year brings familiar challenges, from cost pressures to geopolitical uncertainty. But it also presents opportunities. By adopting new technology, carefully managing expenses and reassessing their finance options, SMEs can put themselves in a stronger position for the year ahead.