After a volatile 12 months with more than a few major global disruptions, 2026 will likely see a continuation and acceleration of established trends already affecting small and medium-sized businesses (SMEs) in Australia.
Trade and tariff disruptions
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From a macro perspective, the fragmentation and restructuring of global trade will continue apace. This will disrupt exporting economies such as Australia, creating a unique set of internal pressures that require constant adaptation.
For example, export-reliant businesses, such as those in the wine industry, have been dealing with the knock-on effects of disturbances in the trade relationship with China over the past five years. And during 2025, we experienced a seismic change in the US trade policy with the introduction of its new tariff regime.
The dust has mostly settled around these changes (for now), but the ripples in the global trade system will continue over the next 18 months as exporters reprogram for the new rules framework. Smaller businesses may well look to smaller pockets of excellence to direct their efforts, as uncertainty in the large markets becomes less attractive in the near term.
Productivity swings and roundabouts
Moving into the political realm, there will be increasing impetus to drive meaningful economic reform.
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Australia’s declining productivity remains a concern, with too many disincentives in place for businesses, particularly around taxation. Incentives need to be re-geared to drive investment in R&D, even if they are applied at a state-based level, like the energy efficiency grants for small businesses.
It’s clear that revenue growth for most SMEs has slowed due to the global trade and tariff disruptions, as well as the cost-of-living crisis biting harder.
However, while revenue growth has been less robust, the data we’re seeing at the Australian Centre for Business Growth shows the SMEs we’ve worked with are seeing a substantial uptick in profitability. The implication is that future-focussed leaders are steering their businesses to become leaner and more efficient.
Excessive cost-cutting
This increased efficiency in companies typically comes from cutting discretionary expenditure such as marketing, sales activity, R&D, and learning and development. This trend will likely continue into 2026 and will have long-lasting effects.
Businesses need to invest in their long-term development, but this often conflicts with short-term commercial interests. For businesses that are seeing profit growth, now is the time to reinvest in R&D, market development, new technologies and upskilling of teams, as these will create significant strategic advantages for the long-term.
From AI experimentation to adoption
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Some states are now issuing grants to small businesses to encourage AI initiatives and adoption. We’re increasingly seeing feedback from SME business owners who are starting to experiment with publicly available AI tools.
What we’re not seeing at scale yet is businesses deploying their own bespoke, in-house AI.
This is likely to start shifting in 2026, with more companies installing AI tools inside a “walled garden” environment, rather than just relying on public versions.
Capital may flow more freely
One positive trend in 2026 is an expected rise in capital available for businesses. Small business lending has suffered in recent years from changes to the regulatory environment and a regulatory drive to create a ‘safer’ banking ecosystem. As a result, business debt financing wasn’t available at the scale required.
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But looking forward, as these changes settle, more capital will begin to flow towards SMEs, enabling owners to finance their growth plans.
Remember to start conversations early with your bank about your financial needs, so they and your partners are prepared to support the next steps in your business growth journey.
Work from home formalised
A big future shift will be the legal encoding of the right to work from home, particularly in Victoria, where the government is considering enshrining WFH in law. Plus, a recent legal ruling against Westpac is pressuring employers to provide employees more flexibility.
This trend may challenge Australia’s competitiveness, as recent data indicates that WFH can negatively affect productivity. And this may in turn affect business innovation, which often depends on in-person collaboration and a multi-disciplinary approach that is much harder to coordinate remotely.
Perhaps we will start to see the emergence of new approaches to how we invest time when we’re together in the workplace?
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Three strategies for business success in 2026
In 2026, SMEs will need to manage ongoing risks while also capitalising on growth opportunities. Three strategies will be critical:
1. AI and automation
In 2026, commit to the implementation of automation and AI inside your business. Stop relying on openly available LLMs and deploy models trained on your own data and integrate AI directly into your CRM and operational systems.
Unlock real productivity gains by treating AI capabilities as practical tools for reducing work process friction and manual effort by employees. Make sure to distinguish where you need an automation solution versus a decisioning (AI) solution.
And of course, a human at the helm is critical in most scenarios to manage the risk, as these technologies are still developing.
2. Renegotiate your workforce practices
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Business leaders must imagine and promote a new social contract with their workforce that helps them adapt to changing work practices – such as achieving AI productivity gains or increasing workplace flexibility.
You can’t control the outside noise around these issues; yet you can control how you are best placed to deal with the opportunities and risks they present, and how and where the most effective work for the company’s future is best performed.
3. Don’t turn off your good costs
Many businesses are driving down rising costs, so there’s a disproportionate advantage to those who keep the taps of marketing and R&D open, even at the expense of short-term profitability. Don’t turn off your ‘good’ costs – only crunch down on your bad costs – because keeping the good costs can help you widen the gap in your competitive advantage over time.
The pace of change will only accelerate in 2026, so SME owners who apply these strategies will be poised to make the year ahead a successful one.
