The AI edge for small business: Increased SMB AI adoption can add $44 billion to Australia’s economy

25 November 2025: Boosting artificial intelligence (AI) adoption among Australia’s small to medium-sized businesses (SMBs) could turbo-charge profits and unlock a near $50 billion economic windfall, according to a Deloitte Access Economics report commissioned by Amazon and released today.

The report, The AI edge for small business, surveyed more than 1,000 Australian SMBs across various industries to assess their AI use against a bespoke AI Maturity Index to understand levels of adoption and the economic opportunity of increasing it.

It found that while two-thirds of SMBs are using AI, just 5% of surveyed SMBs using the technology are fully enabled to realise its potential benefits.

An example of a fully AI-enabled business is one that has an AI strategy embedded in core processes, provides training for employees on AI use, and maintains a fully centralised data system.

With the nation’s more than two million SMBs contributing so much to the Australian economy, Deloitte Access Economics modelling suggests that SMBs moving from basic to intermediate AI use could expect a 45% increase in profitability, which jumps to a 111% increase for a business moving from intermediate to enabled use.

Additionally, if just one in ten SMBs from both these groups advanced one rung on the AI adoption ladder, $44 billion could be added to GDP annually.

Deloitte Access Economics Partner John O’Mahony said: “SMBs contribute more than half of Australia’s private sector GDP and generate 60% of company profits. However, they also lag larger enterprises in productivity per hour worked.”

“This productivity gap drags on Australia’s broader economic performance. Artificial intelligence (AI) offers a powerful way for SMBs to increase efficiency and drive economic growth – if they can clear the barriers that prevent them adopting the technology and unlocking its full value.”

“One-third of the businesses not currently using AI say they don’t know where to start, while around half of those using the technology have only an intermediate level of understanding. We can do better - the AI adoption challenges confronting SMBs can be easily overcome with a little help.”

The report indicates SMBs are enthusiastic about AI, but face five common barriers to adoption.

To overcome these AI adoption roadblocks, the Australian Government should introduce a time limited $1 billion AI investment boost for small businesses via a 50% tax deduction for investment in AI by businesses with an annual turnover below $50 million.

This deduction, targeted towards AI-specific products and services like specific skills training, AI products, services, business systems and infrastructure that enable AI adoption, could unlock $2 billion of SMB investment in the short term.

The five common barriers to SMB AI adoption

#1 Not knowing where to start

Businesses across all industries cited a lack of awareness of AI and how it can be used in their business as a key barrier. Conversely, the key enabler for adopters of AI was the ability of their team to identify the most appropriate use of AI and then incorporate it to improve operational efficiency.

#2 Business systems and data quality limitations

Without suitable business systems and data, the ability of SMBs to scale up AI solutions is being held back. Surveyed SMBs generally rely on less complex types of data (e.g. financial and customer records) to support AI solutions, so don’t always need overly advanced systems to enable an AI uplift. Often, it comes down to a lack of technological knowledge.

#3 Workforce skills

Most SMBs believe their workforces are largely unprepared for AI, and more formal training is required. More than half of SMB workforces have basic or novice levels of familiarity with AI, while just 10% have advanced AI skill levels.

Clearly, there are not enough opportunities for workers in SMBs to upskill in AI. It underscores the importance of making AI education and training more readily available to boost AI literacy across the labour force.

#4 Funding and investment

Many SMBs operate in highly competitive markets and face relatively higher unit costs than larger businesses. They often face tighter budgets, restricting their ability to make large-scale capital or technology investments without a clear return on investment. Despite this, SMBs are willing to spend a considerable amount on AI solutions where appropriate.

#5 AI governance and standards

Surveyed SMBs highlighted the need for more AI guidance as well as industry guidelines for using AI in an ethical and responsible way. However, if the regulatory burden associated with AI use is too great, some SMBs may avoid such technology altogether.