The latest report from the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) has indicated a cautious optimism among small business owners, even as concerns about the impact of artificial intelligence (AI) on employment persist. The ASBFEO Small Business Pulse, released in August 2025, shows a 0.6 percent increase in business conditions for the second consecutive quarter, reflecting a gradual recovery in the small business sector.
This modest growth, amounting to a total increase of 0.2 percent over the past year, suggests a shift in focus for many small business owners. They are moving from merely maintaining operations to exploring avenues for durability, growth, innovation, and leveraging technology, including AI, for productivity enhancements.
The report highlights the continuous challenges that small businesses face. Higher interest rates are affecting financing costs, making it more expensive for small and family-run enterprises to access necessary funds. These financial strains are further compounded by fluctuating customer spending habits and overall market confidence. In response, the Reserve Bank of Australia has lowered the target cash rate to 3.60 percent, which has sparked hopes for increased customer activity and new growth funding possibilities.
Shifting Perspectives on AI and Technology
As small business owners grapple with the implications of AI, many are actively seeking ways to incorporate technology into their operations. The August Pulse indicates a significant uptick in interest regarding digital marketing, e-commerce, and the potential of AI as a transformative business tool. Despite this optimism, concerns remain. A significant 70 percent of employers with at least ten staff members express worries that AI could replace jobs currently performed by humans.
Research conducted by Cisco reveals that only 4 percent of Australian business leaders feel adequately equipped to harness AI effectively. The anxiety surrounding AI’s integration into the workforce underscores the pressing need for owners to balance technology adoption with their workforce’s emotional well-being. The New Access for Small Business Owners (NASBO) program has identified AI as a major stressor for many participants.
Exploring Employment and Regulatory Challenges
Despite the rising concerns about technological advancements, small business owners are increasingly exploring new hiring practices. Queries about employment arrangements, including the potential for employing younger workers or individuals with disabilities, reflect a shift towards creating inclusive workplace environments.
However, the complex landscape of workplace relations continues to pose challenges. Small business owners are searching for clarity on obligations related to pay, superannuation, and evolving regulatory requirements. There has been a notable increase in inquiries regarding whether sole traders can hire staff or operate multiple businesses under a single identifier.
The August Pulse also reveals growing interest in understanding insurance requirements and navigating tax reporting, particularly concerning “side hustles.” Many small business owners are actively seeking ways to reduce operational costs, from exploring alternative suppliers to implementing inventory management systems.
As small businesses navigate these multifaceted challenges, the report underscores the ongoing impact of natural disasters and other external pressures. Although inquiries related to financial distress have decreased, the overall sentiment remains one of high uncertainty.
The ASBFEO has proposed 14 steps to energise enterprise, aimed at enhancing the prospects for Australia’s 2.59 million small businesses. This initiative seeks to provide actionable strategies that can help business owners adapt and thrive in an evolving economic landscape.
In conclusion, while the August Pulse indicates a cautious return to optimism for the small business sector, the multitude of challenges posed by AI, regulatory changes, and financial pressures continues to weigh heavily on owners. As they strive to navigate this complex environment, the importance of community support and resources will be paramount for their success.
