Australia’s small and medium-sized enterprises (SMEs) entered 2026 facing a more complex operating environment, with the latest MYOB SME Performance Indicator showing business activity slowed towards the end of the March quarter as cost pressures and economic uncertainty intensified.
Based on anonymised SME data drawn from more than 200,000 Australian SMEs between January and March 2026, the results suggest the sector remained in growth territory overall, likely due to the recovery gained in the prior two quarters.
While SME activity increased 0.6% across the March quarter and 4.1% over the year, the data suggests growth was stronger earlier in the quarter before easing in March as businesses contended with softer consumer spending, higher borrowing costs and increases across wages, insurance, utilities and supply chain-related expenses.
The report found Property Services, Professional Services and Mining were the strongest-performing sectors in Q1, reflecting relatively stable demand from housing, business and resource-related activity. By contrast, Retail Trade, Hospitality and Health continued to face more challenging conditions as households prioritised essential spending and remained cautious about discretionary purchases.
Paul Robson, CEO of MYOB, said the results highlight both the resilience of Australia’s SME community and the growing pressures businesses are navigating.
“As a bellwether for the broader Australian economy, SMEs are often among the first to reflect shifts in business confidence, consumer demand and economic conditions,” he said
“SMEs entered 2026 from a stronger position following the recovery seen through the latter half of last year, but conditions became more challenging as the March quarter progressed.
“The resilience SMEs built over recent quarters will be important as they navigate what is shaping up to be a more demanding operating environment.”
Since the period captured by the SME Performance Indicator, heightened international tensions and volatility in global energy markets have increased uncertainty for businesses, creating the potential for further pressure through transport, logistics and broader supply chain costs during the remainder of 2026.
The case for greater government support has also become increasingly important in the months following the release of the March data as SMEs manage not only higher costs and subdued consumer demand, but also a more complex policy environment.
The 2026–27 Federal Budget in early May included several favourable measures designed to support business confidence, investment and cash flow, including a permanent $20,000 instant asset write-off and restored loss carry-back provisions. These measures provide welcome certainty for SMEs entering a more challenging economic period.
“This year in particular, practical support from government will be important,” Paul said.
“SMEs need confidence to invest, clarity as tax settings evolve, and measures that help them manage cash flow, capability and compliance in a tougher environment.
“That means backing productivity, digital adoption and access to trusted advice. Together, these help small businesses improve efficiency, manage rising costs and make confident investment decisions, while greater policy certainty gives owners the confidence to plan for growth despite ongoing economic volatility.”
Employment growth remained positive overall, but rising wage costs and ongoing labour challenges continued to place pressure on margins. With conditions likely to remain varied between industries, businesses that continue investing in productivity, technology and operational efficiency are expected to be best placed to navigate the challenges ahead.