Following last year’s tax cuts and the potential for interest rate declines in the coming months, Australia’s small and medium enterprises (SMEs) have reason to be optimistic for 2025, according to the latest edition of the NAB Business Report.
The report found that 33 per cent of SMEs predict higher revenue in 2025, while almost a third plan to increase their employee count (29 per cent). About a quarter (24 per cent) believe customer demand will rise in the coming 12 months.
The NAB Report isn’t the first positive sign for SMEs this year. Fifth Quadrant’s SME Sentiment Tracker also recently discovered that small-business owners are more optimistic right now than they were in 2024.
The report identified a few key reasons for this more positive outlook. One is the likelihood of an interest rate cut that could take effect in the mid-year, another the positive impacts of last year’s tax cuts.
Remaining challenges
Despite the sunnier outlook, challenges remain for small business.
The business owners surveyed cited the cost of doing business as their primary obstacle right now. In fact, 76 per cent of SMEs expect these costs to increase within the next 12 months.
The report also found that the operating environment is also expected to be harder for many, with 41 per cent of survey respondents pointing to an increase in the level of red tape experienced by their business and 35 per cent pointing to a rise in cybersecurity and scam risks.
A substantial number of small-business owners also see profitability (22 per cent), revenue (19 per cent), availability of suitable labour (18 per cent) and customer demand (16 per cent) decreasing over the next year.
What are businesses focusing on this year?
The NAB Business Report noted that businesses will likely focus more on cost-saving measures like streamlining operations, negotiating with suppliers, reducing energy consumption and managing inventory more effectively for 2025.
Other measures involve investing in robust cybersecurity measures, protecting assets, and maintaining trust and confidence.
Proactive measure to avoid future increases in costs, plus an uncertain market, were also popular:
- 41 per cent of business owners were looking to increase their adoption of technology to enhance their business
- 32 per cent wanted to improve their efficiency and productivity
- 32 per cent of business owners are expected to further their adoption of AI across their businesses for improved business efficiencies
- 30 per cent look to increase AI adoption in their cybersecurity investment
