Originally published in The Canberra Times

By Bruce Billson

It is big in the minds of many small business people. Uncertainty and complexity can constrain growth

We have just released the latest ASBFEO Small Business Pulse and there is a glimmer of encouragement.

The ASBFEO Pulse is a respected and highly valued health check of objective vital signs for small business.

It takes into account published economic conditions data, the "animal spirits" that influence decisions and drive behaviour and the "real time" business decisions being contemplated or taken.

The Pulse has shown an increase of 0.6 per cent in August 2025 - the second consecutive quarterly increase.

Over the past 12 months it has increased 0.2 per cent. After facing years of headwinds, business conditions show early signs of improvement, optimism is gaining strength and there's reason for small business owners to be hopeful that this will support their business to thrive.

This modest improvement reflects a continued shift from 'keeping the lights on' towards a focus on durability, growth, innovation and the productivity opportunities from technology and artificial intelligence, and a continued focus on cost containment and repricing to restore long-term margins.

Higher interest rates impact the costs of financing for small and family businesses, and have profound implications for customers in terms of their spending, preferences, and confidence.

It also makes accessing finance by small businesses more expensive, at a time when many business owners are dipping into their own savings to ensure the cashflow is there to support the business.

The Reserve Bank of Australia's decision to reduce the target cash rate to 3.60 per cent and moderating inflation pressures have nourished the hopes of many small businesses for stronger customer activity, market opportunities, and new growth funding possibilities. The August Pulse highlights that small business owners are seeking to diversify their businesses, particularly in industries that have faced tough conditions for a prolonged period.

The enterprising women and men who own small businesses are acutely aware of the broader challenges and opportunities that technological change can bring.

Small business owners are increasingly researching how technology may assist with delighting more customers and boosting productivity by streamlining administrative tasks. Interest in digital and social media marketing, and e-commerce, continues to increase rapidly. But it is AI that is big in the minds of many small business people.

Queries about using artificial intelligence as a transformative tool or to support regulatory compliance have continued to increase, along with concerns about the impact of possible regulatory interventions or policy measures aimed at safeguarding the community.

A challenge emerging for regulators is a view expressed by some small businesses, that AI tools can at times provide clearer, more readily implementable (but unverified) guidance than the resources provided by the regulators themselves.

Small business owners recognise the risks and are concerned about the impacts of AI on their business and for their staff.

The highly valued emotional wellness program, New Access for Small Business Owners (NASBO) is seeing participating small business owners citing AI as a key stressor. And according to the Australian Survey of Social Attitudes 2024, of the employers with at least 10 staff, 70 per cent are concerned about technology and AI replacing work currently performed by people.

Recent reports of research by digital telecommunications giant Cisco, found only 4 per cent of Australian business leaders said they felt they were equipped to take advantage of AI. We know that the nature of work and the workforce will be changing, and let's not forget, 93 per cent of workplaces are small businesses. Pleasingly, the data points to an uptick in queries about hiring staff, with a shift away from concerns about staffing availability, to costs.

The complex workplace relations landscape continues to be a concern, with small businesses looking for information on employment arrangements and entitlements, including changes to pay and superannuation.

Small business owners are finding new ways of providing employment and opportunity in their communities, whether through research into employing younger workers or people with disability, or providing parttime and flexible working arrangements.

Concerns about regulatory requirements have also increased this quarter.

Beyond workplace laws, privacy duties, workers compensation and payroll tax obligations are just a few of the many challenging areas facing small businesses.

This uncertainty and complexity can constrain growth. The August Pulse shows an increase in queries about whether sole traders can employ staff and whether small business owners can operate multiple businesses under a single business identifier. Small business owners are continuing to research options to reduce business expenses across their operations.

This ranges from researching alternative wholesale suppliers, utilities, and freight options, to proactive controls such as inventory management, particularly cloud-based options. Research on finance options to ensure cash flow have increased, including invoice factoring. Corporate insolvencies remain relatively high, with unincorporated business insolvencies starting to rise, although remaining below pre-pandemic levels in nominal terms. Small businesses are increasingly seeking information on protections available to trade creditors in case a business that owes them money becomes insolvent.

Although the volume of queries from small business owners experiencing financial difficulties has eased, the level of distress remains high. The lasting impact of natural disasters compounds these pressures for many small businesses.

While this health check on small businesses in the last quarter shows cautious optimism, let's not forget the myriad of recent regulatory changes that add to the mental load of business owners.

However, as the August Pulse shows, the rebuilding of business optimism and vitality isn't marked by a single moment, but by a series of small, upward steps.

That's why we have proposed 14 steps to energise enterprise designed to improve the prospects of success for the nation's 2.59 million small businesses. You can find the steps on the ASBFEO website, 14 steps to boost Australia's small and family businesses.