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This November 2025 survey records respondents’ assessments at the time, not a current measure of Australian business productivity.
AUSTRALIA'S PRODUCTIVITY PROBLEM:
What small businesses
say is holding them back
Executive
Summary
The issue has concerned both the Federal Government and the Reserve Bank of Australia.
To discover the specific challenges and sentiments on the ground, SMB Loan (SMB Loan) surveyed 226 business owners and decision makers across all states and territories, sectors and business sizes.
The results reveal the nation's productivity slowdown is being felt acutely at the coalface. The business sector struggling to operate efficiently under the weight of labour shortages, low employee engagement, rising costs, stock delays and a drop in sales.
Key findings
| Finding | Share of respondents |
|---|---|
| Skilled-staff shortages as a barrier | 31% |
| Affordable new technology/equipment would help | 38% |
| Less red tape or productivity incentives would help | 36% |
| Easier finance access would help | 24% |
About the study
The SMB Loan Productivity Survey 2025 was conducted via an independent online panel of 226 business owners and decision makers.
Recruitment methods, response rate, weighting and respondent counts for each state and business-size group are not available in the retained records. No subgroup counts have been inferred from rounded percentages. Treat the breakdowns as descriptive results; they do not establish national representativeness or statistically reliable differences between groups.
Respondents represented a mix of industries, business sizes, and states and territories.
The survey asked respondents which factors, out of the 12 listed, are challenging their business's productivity.
- Difficulty finding skilled staff, causing staff capability gaps, reducing productivity
- Low staff engagement, leading to less output for hours worked
- Remote or hybrid work has been reducing efficiency
- High absenteeism or presenteeism (staff frequently absent or working sick)
- High staff turnover (new hires take time to train up)
- People stretched too thin (reduced decision making speed, slower project delivery)
- Delays in supplies or stock have delayed business output
- Not investing, or cannot afford, new technology or equipment that would boost efficiencies
- Rising compliance and red tape (regulatory burden)
- Inefficient internal processes (e.g. reporting, approvals, meetings)
- Changing priorities (the business is working on new products, services or markets, dampening efficiencies in core outputs)
- Drop in customers or sales (leading to staff working, but not generating output).
Next, it asked businesses which out of these eight possible factors would help improve their productivity over the next year.
- Affordable access to new technology or equipment (automation, faster systems, better tools)
- Training in how to use AI and other digital tools (knowing how to apply them day to day)
- Government reducing compliance burden or offering stronger productivity incentives (cutting red tape, tax offsets, grants)
- Easier access to finance for productivity investments (hiring, tech, upgrading equipment)
- A larger pool of skilled workers to recruit from (addressing capability gaps and hiring delays)
- More flexible workplace laws and regulations (greater freedom to adapt staff levels, roles and work arrangements to business needs as sales and economic conditions change)
- Ongoing training and upskilling for existing staff (lifting capability and efficiency on the job)
- Improved economic conditions to lift sales.
What's holding back
business productivity?
When asked what is most making it difficult to produce goods and services efficiently, business owners pointed overwhelmingly to labour shortages, employee engagement, no budget for new technologies, and a general drop in customers or sales.
The survey separates staffing, processes, stock delays, technology and demand. These are respondents’ assessments, not audited output per hour or evidence of a particular return. Buying software will not necessarily solve weak sales, and extra staff will not necessarily fix an approval bottleneck. Use the findings to identify a process to investigate and measure in the business.
, for 31 per cent of business
- is the lack of skilled talent.
When businesses can't find people that don't need extensive training just to do the job, existing staff fill the gaps, slowing down decision making, output and customer delivery.
This challenge is likely to be felt strongly across critical industries, from construction and trades to medical and professional services.
A lingering effect of the pandemic era is the rise of phenomena such as 'quiet quitting', doing the minimum on the job.
Engagement and morale impact productivity directly, as lower enthusiasm can lead to less output per hour worked. In fact, workers are at the heart of the productivity problem.
Supply delays and drops in customer demand indicate that productivity is also influenced by external factors (an equal 20% of businesses)
Beyond people issues, businesses are also weighed down by financial barriers.
What's holding back
business productivity
on a national scale?
Productivity challenges across
businesses of various sizes
SMB Loan analysed answers across business sizes.
It reveals that micro businesses (1 to 10 employees) are by far the most constrained by skills shortages (at 60%), showing how small teams struggle when even one role remains vacant.
But they are least affected by disengagement (at 0%) and only moderately impacted by staff turnover (20%).
Medium sized and large businesses are more likely to report low engagement (33% and 36% respectively), internal inefficiencies (18% and 33%), and stretched people (32% and 17%).
As firms grow, productivity challenges shift from survival to management.
Large businesses are more likely to be challenged by high staff turnover (at 38%), low staff engagement (at 36%) inefficient processes (33%) and high absenteeism (25%).
| Challenge | Micro (1 to 10) | Small (11 to 50) | Medium (51 to 200) | Large (200+) |
|---|---|---|---|---|
| Difficulty finding skilled staff | 60% | 22% | 43% | 31% |
| Low staff engagement | 0% | 13% | 33% | 36% |
| Remote or hybrid work reducing efficiency | 67% | 0% | 25% | 31% |
| High absenteeism / presenteeism | 20% | 3% | 13% | 25% |
| High staff turnover | 20% | 5% | 20% | 38% |
| People stretched too thin | 10% | 10% | 32% | 17% |
| Delays in supplies or stock | 0% | 18% | 20% | 25% |
| Not investing / cannot afford new tech | 21% | 10% | 20% | 21% |
| Rising compliance / red tape | 15% | 10% | 20% | 17% |
| Inefficient internal processes | 10% | 7% | 18% | 33% |
| Changing priorities | 15% | 15% | 13% | 21% |
| Drop in customers or sales | 0% | 37% | 12% | 4% |
Productivity pressures vary
widely by State and Territory
SMB Loan's analysis of responses by location found that labour issues dominate across all regions.
Beyond labour challenges, Queensland businesses are most likely to struggle with delays in supplies or stock (32%),
While businesses in South Australia are frustrated with rising red tape (26%), double the rate of NSW (13%) and more than three times the rate of Queensland (7%).
| Challenge | NSW | QLD | VIC | WA | SA |
|---|---|---|---|---|---|
| Difficulty finding skilled staff | 30% | 29% | 25% | 39% | 42% |
| Low staff engagement | 29% | 24% | 18% | 44% | 11% |
| Remote or hybrid work reducing efficiency | 22% | 5% | 18% | 6% | 5% |
| High absenteeism / presenteeism | 18% | 17% | 5% | 17% | 11% |
| High staff turnover | 20% | 12% | 15% | 28% | 16% |
| People stretched too thin | 20% | 20% | 16% | 33% | 16% |
| Delays in supplies or stock | 23% | 32% | 10% | 22% | 21% |
| Not investing / cannot afford new tech | 22% | 17% | 21% | 17% | 21% |
| Rising compliance / red tape | 13% | 7% | 8% | 22% | 26% |
| Inefficient internal processes | 15% | 10% | 8% | 17% | 5% |
| Changing priorities | 16% | 12% | 15% | 17% | 16% |
| Drop in customers or sales | 23% | 22% | 13% | 22% | 26% |
Businesses reveal the factors
that would lift productivity
When asked what would most help them improve productivity, business owners indicated they are ready to innovate and invest, but they need the right environment.
The strongest signal from respondents is the desire to adopt technology, affordably.
More than one third (38%) said better access to new or upgraded technology and equipment would make the biggest difference to productivity.
This encompasses everything from automation tools to faster systems and cloud based platforms. All upfront costs, expertise and certainty about which tools will deliver real gains.
Nearly as many (36%) said reducing red tape or introducing stronger productivity incentives would have the greatest effect.
Businesses want less paperwork, simpler compliance and the freedom to focus on running their operations.
A significant 29 per cent said training in how to use AI and other digital tools effectively would help. Businesses know that technology alone isn't enough; staff need the skills to use it.
An equal one in four (24%) said easier access to finance or a larger skilled workforce would improve productivity, while 23 per cent said flexible workplace laws and ongoing staff training and upskilling are key.
More than a quarter (27%) said stronger economic conditions would create productivity improvements.
Ultimately, the findings reveal the business sector is ready to act if supported. Business owners and decision makers can get on with it if they have the right policy and financial environment.
This encompasses everything from automation tools to faster systems and cloud based platforms. All upfront costs, expertise and certainty about which tools will deliver real gains.
Businesses want less paperwork, simpler compliance and the freedom to focus on running their operations.
Businesses know that technology alone isn't enough; staff need the skills to use it.
An equal one in four (24%) said easier access to finance or a larger skilled workforce would improve productivity, while 23 per cent said flexible workplace laws and ongoing staff training and upskilling are key.
Ultimately, the findings reveal the business sector is ready to act if supported. Business owners and decision makers can get on with it if they have the right policy and financial environment.
Factors that would
lift productivity
What businesses of different
sizes need to boost productivity
When analysing responses by businesses of different sizes, SMBLoan found that for large businesses, technology access (50%) and less red tape (50%) would lift productivity.
Micro businesses stand out for their need for AI training and workplace flexibility (67%), suggesting labour intensive tasks and rigid employee laws hinder efficiency for businesses of this size.
Small and medium sized businesses fall in the middle: more constrained by capital (many citing easier access to finance and improved conditions) but less likely to prioritise structural reforms.
| Productivity boosters | Micro (1 to 10) | Small (11 to 50) | Medium (51 to 200) | Large (200+) |
|---|---|---|---|---|
| Affordable access to new technology/equipment | 33% | 25% | 40% | 50% |
| Training in AI/digital tools | 67% | 17% | 33% | 42% |
| Reducing compliance burden / productivity incentives | 33% | 36% | 42% | 50% |
| Easier access to finance | 15% | 15% | 28% | 33% |
| A larger skilled workforce | 15% | 15% | 28% | 33% |
| More flexible workplace laws | 67% | 7% | 20% | 29% |
| Ongoing training/upskilling | 33% | 14% | 27% | 29% |
| Improved economic conditions | 33% | 45% | 17% | 21% |
Factors that would help lift
productivity, by State and Territory
SMB Loan found that Queensland and South Australia lead the need for the government to reduce red tape (46% and 58% respectively).
NSW and Queensland are most in need for affordable technology (42% and 49%) that will help them increase outputs per hours worked.
Victorian businesses produced the lowest percentages across multiple categories, suggesting that they have fewer pain points or fewer productivity issues.
Productivity boosters | NSW | QLD | VIC | WA | SA |
|---|---|---|---|---|---|
Affordable access to new technology/equipment | 42% | 49% | 29% | 33% | 16% |
Training in using AI and digital tools | 41% | 24% | 20% | 33% | 16% |
Reducing compliance burden / productivity incentives | 33% | 46% | 28% | 33% | 58% |
Easier access to finance | 25% | 22% | 25% | 22% | 26% |
A larger skilled workforce | 27% | 15% | 25% | 33% | 16% |
More flexible workplace laws | 37% | 15% | 8% | 33% | 16% |
Ongoing training/upskilling | 32% | 7% | 18% | 33% | 32% |
Improved economic conditions | 28% | 29% | 20% | 33% | 32% |
Use the findings without overstating the sample
The 31% skills result describes a reported barrier; 38% technology and 36% red-tape/incentive figures describe changes respondents believed would help. They answer different questions. Neither proves the return on a particular project or the effect of a policy.
State and business-size respondent counts were not supplied. NT and ACT columns have been removed from the displayed tables because apparently extreme percentages cannot be interpreted responsibly without their bases. Counts are also unavailable for the remaining groups; no statistical ranking is claimed. The original tables are retained for source tracing, including omitted columns, with that limitation.
For a business considering spending on technology, estimate implementation costs and additional cash separately from expected time savings. The equipment-finance guide and cash-buffer model help place repayments and operating expenses on the same calendar.