Most Australian business owners have spent the past two years watching their costs rise while their prices stayed exactly where they were. It is the defining commercial problem of the moment, and until June we had very little hard evidence of how widespread it had become.
We do now. The Australian Bureau of Statistics released Characteristics of Australian Business 2024–25 on 25 June, drawing on responses from nearly 7,000 Australian businesses, and the finding is stark: almost one in three are now cutting their own profit margin simply to hold onto work. Three years ago that figure was one in five.
What makes the release genuinely useful, though, is not that single statistic. It is that the same survey explains why the two obvious remedies have stopped working, and then shows why AI for Australian businesses is becoming a practical third option for reducing delivery costs and protecting margins.
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Australian businesses are facing a margin problem
The ABS released its Characteristics of Australian Business, 2024–25 report on 25 June 2026.
Its findings illustrate the pressure currently facing Australian businesses:
- 30% said lower profit margins required to remain competitive were significantly hampering the business.
- 35% reported experiencing a skills shortage.
- Among businesses experiencing skills shortages, 48% said wages or salary costs were already too high.
- Despite this, 35% increased wages, salaries or employment conditions to address their shortages.
- 12% of Australian businesses now use AI, compared with approximately 1% three years earlier.
The rapid growth of AI for Australian businesses suggests more owners are looking for ways to improve productivity with their existing teams. Together, these figures close off the two responses businesses have traditionally used when margins come under pressure. They cannot always charge more because customers are already pushing back on price. They cannot always hire more people because the staff are either unavailable or too expensive. That leaves one practical lever: reducing what it costs to deliver the work. Used correctly, AI for Australian businesses can reduce this cost by removing unnecessary manual steps from everyday processes.
There are only three ways to protect a profit margin
At its simplest, a profit margin is the difference between what a business charges and what it costs to deliver its product or service. The commercial value of AI for Australian businesses comes from improving the cost side of that equation.
There are therefore only three ways to protect it:
- Charge more.
- Spend less.
- Deliver the same or greater output more efficiently.
1. Charge more
For many businesses, this door has already closed.
The ABS found that 30% of businesses were being significantly hampered by the need to lower their profit margins to remain competitive. That is a clear indication that many businesses are moving in the opposite direction and discounting to keep work on the books.
A business with enough pricing power to pass every cost increase on to its customers is unlikely to be searching for ways to protect its margin. For everyone else, AI for Australian businesses can provide a way to protect margins without relying entirely on price increases.
2. Spend less
In most service businesses, people are the largest operating cost.
Unfortunately, this is also one of the fastest-moving costs.
More than one-third of Australian businesses experienced a skills shortage during 2024–25. Among those businesses, 48% said wages or salary costs were already too high for the business.
Many increased wages regardless.
Thirty-five per cent of businesses experiencing skills shortages responded by increasing wages, salaries or employment conditions. They did not necessarily do this because the numbers worked. They did it because they had few other options.
This means many businesses cannot hire their way out of the problem. AI for Australian businesses can help close this capacity gap by allowing existing employees to complete more work with less repetitive administration.
3. Reduce the cost of delivering the work
That leaves the third option: changing how the work gets done. AI for Australian businesses makes this possible by reducing the manual effort involved in delivering everyday services.
Businesses need to find ways to process more work, serve more customers and generate more revenue without increasing their costs at the same rate. This is the central opportunity presented by AI for Australian businesses under pressure to protect their margins.
This is where business process automation and AI for Australian businesses become commercially important.
The question is no longer whether AI is interesting. The more useful question is where AI for Australian businesses can create a measurable operational improvement. The question is whether it can reduce the cost of delivering work.
What the 12% using AI are actually doing
Approximately one in eight Australian businesses reported using AI during 2024–25, compared with around 1% in 2021–22.
That is a substantial increase, but the technology itself is not the most important part of the story. Adoption of AI for Australian businesses only matters when it improves how work is completed.
The important question is what happens to a business’s cost of delivery after the technology is introduced.
In the small and medium-sized businesses we work with, the largest opportunities rarely involve automating the trade, profession or service at the centre of the business. Instead, AI for Australian businesses is often applied to the supporting processes that consume time without directly generating revenue.
The opportunities are usually found in the administrative layer surrounding that work. In practice, AI for Australian businesses is often most valuable when applied to repetitive tasks that sit around the core service.
This can include:
- Preparing quotes and proposals
- Entering the same information into multiple systems
- Processing emails and attachments
- Completing compliance documentation
- Producing reports
- Following up customers and suppliers
- Scheduling staff and projects
- Extracting information from documents
- Updating customer relationship management systems
- Moving information between disconnected platforms
None of this work can usually be invoiced directly to a customer, but every hour spent completing it still costs the business money. AI for Australian businesses can recover some of those hours by processing information, preparing documents and updating systems automatically.
Automation is not necessarily about reducing headcount
Discussions about AI often jump immediately to replacing employees.
That is not where most Australian small and medium-sized businesses will find the greatest value. The stronger case for AI for Australian businesses is increasing the capacity of people who are already employed.
For a business already struggling to recruit, the objective is generally not to remove people. It is to recover the time those people currently lose to repetitive administration.
Those recovered hours can be returned to:
- Delivering client work
- Responding to customers
- Preparing additional quotes
- Following up opportunities
- Improving service quality
- Managing higher-value projects
- Supporting business growth
A team that spends less of its week on administration has more capacity to sell, deliver and support customers without requiring an equivalent increase in payroll. This is how AI for Australian businesses can improve productivity without placing additional pressure on wages or recruitment.
Business process automation can therefore improve a margin from both directions. When implemented properly, AI for Australian businesses can lower the cost to serve while increasing the amount of work a team can handle.
It can lower the cost to serve while increasing the organisation’s revenue capacity.
AI adoption varies enormously between industries
The national AI adoption rate of 12% hides a significant gap between industries. Adoption of AI for Australian businesses is therefore developing at very different speeds across the economy.
| Industry | Businesses using AI | Approximate equivalent |
|---|---|---|
| Information, media and telecommunications | 38% | Nearly 2 in 5 |
| Professional, scientific and technical services | 24% | Around 1 in 4 |
| Financial and insurance services | 24% | Around 1 in 4 |
| Mining | 18% | Around 1 in 6 |
| Health care and social assistance | 17% | Around 1 in 6 |
| Arts and recreation services | 16% | Around 1 in 6 |
| Electricity, gas, water and waste services | 15% | Around 1 in 7 |
| Wholesale trade | 14% | Around 1 in 7 |
| Administrative and support services | 12% | Around 1 in 8 |
| Rental, hiring and real estate services | 11% | Around 1 in 9 |
| Manufacturing | 9% | Around 1 in 11 |
| Retail trade | 9% | Around 1 in 11 |
| Construction | 6% | Around 1 in 17 |
| Accommodation and food services | 5% | Around 1 in 20 |
| Agriculture, forestry and fishing | 3% | Around 1 in 33 |
| Transport, postal and warehousing | 1% | Around 1 in 100 |
Source: Australian Bureau of Statistics, Characteristics of Australian Business, 2024–25.
The bottom of this table deserves particular attention. Some of the industries with the lowest adoption of AI for Australian businesses also contain the greatest amount of repetitive administration.
Transport and warehousing recorded 1% adoption, construction 6%, and manufacturing and retail both recorded 9%.
It would be easy to interpret these figures as evidence that AI does not suit physical, operational or on-the-ground industries.
The opposite is often closer to the truth.
These sectors rely heavily on:
- Scheduling
- Quoting
- Compliance documentation
- Job allocation
- Proof of delivery
- Invoice processing
- Customer communication
- Supplier coordination
- Document management
- Moving data between separate systems
These are precisely the types of repetitive, rules-based processes that modern automation handles well. This makes AI for Australian businesses particularly relevant to industries that manage large volumes of documents, schedules, quotes and customer updates. The barrier is often not suitability. It is a lack of awareness about what can realistically be automated.
Business size is not the deciding factor
The conventional assumption is that large organisations can afford AI and smaller businesses cannot.
The ABS data suggests that size is only part of the story. Access to AI for Australian businesses is no longer limited to organisations with large technology teams or enterprise budgets.
A much stronger indicator is whether the business has developed a habit of changing and improving how its work is completed.
The ABS separates businesses into those that were innovation-active and those that were not. An innovation-active business had introduced or developed a new product, service or process during the reporting period.
AI adoption differed significantly between these two groups.
| Business size | Innovation-active | Not innovation-active |
|---|---|---|
| Micro businesses with 0–4 employees | 18% | 6% |
| Small businesses with 5–19 employees | 19% | 4% |
| Medium businesses with 20–199 employees | 28% | 13% |
| Large businesses with 200 or more employees | 37% | 29% |
Share of businesses using AI by innovation status and employment size. Source: Australian Bureau of Statistics, Characteristics of Australian Business, 2024–25.
Among businesses with fewer than five employees, 18% of innovation-active businesses were using AI.
Among businesses with up to 199 employees that were not innovation-active, adoption reached only 13%.
In other words, some of the smallest businesses in Australia are adopting AI at a higher rate than businesses many times their size.
The difference becomes even more pronounced among businesses with 5 to 19 employees. AI adoption was 19% among innovation-active businesses, compared with just 4% among those that were not innovation-active.
This suggests the advantage is not simply going to the business with the largest technology budget. The advantage from AI for Australian businesses is increasingly going to organisations that are willing to improve their underlying processes.
It is going to the business that is prepared to reconsider how its work gets done.
Your more efficient competitor may be smaller than you
The competitor capable of delivering the same work for less may not be a large national organisation.
It may be a smaller business with fewer overheads, faster internal processes and a deliberate approach to automation. By adopting AI for Australian businesses, smaller operators can create an efficiency advantage without building a larger workforce.
That business may be able to:
- Prepare quotes faster
- Respond to enquiries sooner
- Process more jobs with the same team
- Reduce administrative errors
- Provide customers with more consistent communication
- Complete compliance requirements with less manual effort
- Operate at a lower cost per job
You may not see that operational advantage from the outside.
You are more likely to notice it when you compete against them for work.
They may be able to submit a lower price without sacrificing the same amount of margin because their cost of delivery is already lower.
Why businesses stall before introducing AI
The ABS also asked businesses what prevented or limited their use of information and communication technologies.
The two most commonly reported barriers were:
- Insufficient staff skills and capabilities, reported by 16% of businesses
- Uncertainty about the costs and benefits, reported by 13% of businesses
Both barriers can be addressed before a business commits significant money to a new system. A successful approach to AI for Australian businesses should therefore begin with a clear problem, expected benefit and method of measurement.
However, many businesses begin by purchasing a tool rather than identifying a business problem.
The business then struggles to integrate the tool into its existing processes, cannot determine whether it has produced a measurable benefit, and eventually stops using it.
The ABS found that only 7% of Australian businesses measured the contribution of their digital activities to overall business performance.
That is approximately one in fourteen businesses.
The remaining businesses may be investing in software without establishing whether it is saving time, reducing errors, increasing capacity or improving profitability.
Start with the process, not the AI tool
A successful AI or automation project should begin with a commercial problem. The strongest opportunities for AI for Australian businesses are usually found by examining where time, capacity and money are currently being lost.
Before considering technology, a business should identify:
- Which repetitive processes consume the most staff time?
- Where is information manually copied between systems?
- Which tasks create delays for customers?
- Where do errors or missing information regularly occur?
- Which reports or documents are repeatedly created by hand?
- Which processes prevent employees from completing higher-value work?
- What measurable result would justify the investment?
The final question is particularly important.
A business should be able to define what success looks like before implementation begins.
That could include:
- Reducing the time required to prepare a quote
- Processing more enquiries with the existing team
- Reducing data-entry errors
- Shortening customer response times
- Recovering a specific number of administrative hours each week
- Increasing the number of jobs completed each month
- Reducing the cost per transaction, claim or project
AI should not be adopted simply because it is available.
It should be introduced where there is a clear operational problem and a measurable commercial return.
The margin gap will become a process gap
For most Australian businesses, margin pressure is unlikely to disappear on its own.
Customers will continue to compare prices. Skilled workers will remain expensive. Administrative requirements will continue to increase.
The businesses best positioned to protect their margins will not necessarily be those that charge the highest prices or employ the largest teams.
They will be the businesses that can deliver the same result with fewer delays, fewer manual steps and less administrative effort.
AI for Australian businesses is not ultimately about following a technology trend.
It is about lowering the cost of delivery, increasing the capacity of existing teams and building a more competitive operating model.
One in three businesses are already sacrificing their own margin to remain competitive.
The more important question is what the others are changing so they do not have to.
Find out where AI and automation could reduce your delivery costs
Ascend AI helps Australian businesses identify repetitive processes, disconnected systems and administrative work that can be improved through practical AI and business process automation.
We begin by examining how work currently moves through the business, where time is being lost and which improvements are most likely to produce a measurable commercial return. This ensures AI for Australian businesses is connected to a genuine operational need and a clearly defined business outcome.
Our approach to AI for Australian businesses focuses on practical improvements that increase capacity, reduce manual effort and strengthen profit margins.
The objective is not to introduce technology for its own sake. It is to help your business increase capacity, reduce its cost to serve and protect its profit margin.
Book a free Discovery Call and let us map out what AI orchestration could look like for your organisation.
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