The ASBFEO Small Business Pulse increased by 0.1% in May 2025 – the first quarterly increase since August 2022. Over the past 12 months it has fallen 0.9%.
The Australian Small Business and Family Enterprise Ombudsman, Bruce Billson, said this modest lift reflected a shift towards re-pricing as input inflation starts to ease, with a longer-term view on margins, cost containment and growth opportunities coming to the fore of small business owners’ thinking.
“For small and family businesses, higher interest rates not only impact their costs of financing but have profound implications for customers in terms of their spending, preferences and confidence. The Reserve Bank of Australia’s decision to further reduce the target cash rate to 3.85% and moderating inflation pressures provide a ray of light after a prolonged period of difficult conditions for small and family businesses,” Mr Billson said.
The Small Business Pulse is a health check of objective vital signs for small business while also taking into account the ‘animal spirits’ that drive decision making.
“Both demand and supply factors are being considered as small business owners consider their margins for continued viability and opportunities for growth. Small business owners are reviewing customer satisfaction, input costs, final prices, and ways to increase sales, product offerings and margins. This increasingly includes researching importing and exporting. This is widespread, from importing software products and hospitality supplies, to exporting in the retail and agricultural sectors. These enquiries are predominately about engaging in trade in the Asia-Pacific,” Mr Billson said.
“Household spending is showing early signs of recovery, although it remains weak in the hospitality industry. Cost of living pressures have constrained demand for a prolonged period, particularly in sectors that rely on discretionary spending such as hospitality. This has made it difficult for small and family businesses in these sectors to increase their prices to protect their margins.
“Small business owners are increasingly turning to artificial intelligence to find new opportunities and develop plans to grow their business. This research into artificial intelligence supplements research into digital services including software and cloud computing. Small business owners are considering how these technology tools can support regulatory compliance as well as natural disaster preparedness.
“Many small businesses have navigated the impacts of natural disasters so far this year. These business impacts include temporary closure and lost income, utility outages, structural damage to property, ongoing site mould issues and difficulty finding physical business records. In some cases, lack of business records impeded the sale of businesses. However, the recent flooding will likely have an impact over the year (and potentially years to come), with small businesses active in seeking help tailored to their very difficult circumstances.
“There has been a modest uptick in small businesses considering hiring additional staff, particularly in the hospitality and disability support industries. Difficulty finding suitable staff remains an issue, reflecting a persistently tight labour market, and prospects for productivity improvement remains weak. Small business owners continue to report how difficult it is to navigate the complex workplace laws and fear doing something wrong.
“Enquiries for information on staff and independent contractors’ superannuation entitlements remain relatively high, along with worries about having unclear advance notice of any changes. Concerns about other regulatory requirements, beyond workplace laws, have moderated slightly but remain elevated relative to historical trends.
“Cash flow remains a significant concern for small businesses, but many have a sense that the worst is over with moderating inflation pressures, improving consumer sentiment and a small uptick in optimism following the Reserve Bank of Australia’s recent reductions in the target cash rate. Rising requests for ASBFEO’s help reflect these cash flow concerns. Payment disputes continue to be the most common dispute our office assists with. Payment disputes account for two in five requests for help, most commonly in the construction industry and increasingly in the hospitality and disability support industries. In many cases, the business customer has told the small business supplier that they can’t afford to pay them. These disputes can put an unpaid small or family business with modest cash reserves in a precarious position.
“The small uptick in optimism of small business owners is magnified in those considering starting a business. These entrepreneurial ideas focus on addressing social and environmental issues such as improving outcomes for vulnerable people, sustainable farming and renewable energy[1]. Queries about starting a business were notably driven by an uptick in current and prospective digital nomads and influencers.
“We need to do more to energise enterprise and create and nurture the spark that will inspire someone to turn an idea into investment, to build a business, to take on the risk and big responsibility of creating an opportunity-generating new enterprise, and to employ that extra person. That’s why we have proposed 14 Steps designed to give more support to the nation's 2.59 million small businesses,” Mr Billson said.
You can find them here www.asbfeo.gov.au/14-steps
MEDIA CONTACT: 0448 467 178 / www.asbfeo.gov.au
[1] Department of Industry, Science and Resources Contact Centre Operational Data (February to April 2025).
