Australia’s small business sector has spent the better part of a decade grappling with sluggish productivity, rising operating costs and tightening labour markets. Now Deloitte.’s new AI Edge for SMBs report — based on a national survey of 1,000 small and medium-sized businesses (SMBs) in Australia — points to an unusually large opportunity hiding in plain sight: if just one in 10 SMBs took even a modest step up in AI maturity, the resulting uplift in efficiency and profitability could translate into a $44 billion boost to Australia’s economy.
It’s a striking figure that underscores a turning point for SMBs, as the conversation around AI moves beyond hype and into practical questions about productivity, systems and skills. SMBs aren’t asking whether AI will matter — two-thirds already use at least one AI-powered tool — but how to apply it meaningfully, and how to scale beyond ad-hoc experimentation.
SMBs are using AI — but only at the shallow end of the pool
The report highlights a striking mismatch between adoption and capability. While 65% of SMBs report using AI, most are “basic adopters” relying on simple, off-the-shelf tools — from email drafting to content creation — rather than deeper automation or analytics that actually move the productivity needle. About one in three SMBs say they simply don’t know where to start, a finding that speaks to the proliferation of AI tools (more than 10,000 globally) and the difficulty of mapping them to real business needs.
Only 5% of SMBs qualify as ‘enabled’, with integrated systems, trained staff and AI deployed across multiple workflows. These are the businesses reaping the strongest returns — and the ones demonstrating how much ground the rest of the sector still has to cover.
Retail stands out as the exception. SMB retailers are 22% more likely to have adopted AI than other industries and up to three times more likely to be using agentic AI. Unsurprisingly, they’re also capturing the steepest profitability gains: Deloitte finds that retailers moving from basic to intermediate adoption effectively double their profit uplift compared with other industries. Competitive pressure — and a wave of AI features bundled into e-commerce and marketing platforms — is accelerating the shift.
Why the maturity gap matters more than the adoption gap
One of the report’s strongest insights is that the economic upside isn’t tied to pushing every business to the AI frontier. Instead, the biggest dividend comes from helping the bulk of SMBs lift themselves one notch on Deloitte’s five-pillar maturity scale — covering AI tools, data systems, workforce skills, strategy, and responsible-AI governance.
A typical small business moving from “basic” to “intermediate” adoption could see a 45% increase in profitability, while a medium-sized business could add more than $600,000 in annual profit at higher maturity levels. Extrapolated nationally, even a modest shift — 10% of basic adopters moving up — yields a $13.4 billion GDP uplift.
In other words, AI isn’t just a technology gap; it’s a capability gap. And that gap is widening as larger firms scale their own AI programs, creating the risk of SMBs falling further behind at a moment when productivity is already under pressure.
What’s holding SMBs back?
The report identifies five barriers shaping the adoption curve:
- Confusion at the starting line — the top challenge across all industries.
- Fragmented systems and low-quality data, which prevent AI tools from scaling.
- Workforce skills shortages, with only 10% of SMB employees reporting advanced AI capability.
- Funding constraints, especially for small businesses with limited capital.
- Governance and regulatory uncertainty, which can deter adoption entirely.
It’s a familiar list — but one that now comes with a clear economic cost.
A national incentive on the table
To accelerate adoption, Deloitte floats a $1 billion, one-year AI Investment Boost — a temporary 50% tax deduction designed to nudge SMBs into upgrading systems, upskilling workers and developing AI strategies. If matched by private co-investment, the total injection could reach $2 billion.
Whether the proposal gains political traction remains to be seen. But the message is unmistakable: AI has become a productivity lever Australia can no longer afford to ignore, and SMBs — long the engine of the economy — are the sector most at risk of missing it.
In the meantime, the businesses already experimenting seriously with AI are building a competitive edge that won’t be easy to catch later. For everyone else, the message from Deloitte is simple: start small, start soon — but start.