(22 August 2025 – Australia) New research from ScotPac highlights how mounting productivity challenges are weighing on Australia’s SME sector by driving up wages, and why urgent action is needed as productivity takes centre stage in Canberra this week.
According to early insights from the September release of ScotPac’s bi-annual SME Growth Index (SMEGI) Report, more than one in five SMEs (21 percent) say productivity barriers are driving up wage costs and holding back innovation and growth. Metropolitan businesses – which contribute 75-80 percent of national GDP – are especially affected, with 24 percent reporting productivity linked payroll impacts compared to 14 percent of regional businesses.
The Productivity Commission reports that while SMEs account for more than half of Australia’s GDP, they lag large firms in productivity performance by around 50 percent, broadly consistent with other OECD member nations.
ScotPac CEO Jon Sutton has called for urgent action to put SME productivity at the heart of this week’s Economic Roundtable.
“A strong and productive SME sector is fundamental to a healthy national economy. Yet the heavy regulatory burden faced by small and medium-sized businesses is eroding margins, holding back investment, and stifling innovation. Closing the productivity gap between SMEs and larger firms is both achievable and essential. It should be a top priority for policymakers this week.”
“Achieving this will require sensible, supportive government settings – cutting red tape, incentivising skills development, and encouraging investment in innovation. With the right conditions in place, SMEs can redirect their energy toward growth and performance, strengthening their role as the backbone of Australia’s economy.”
“The Economic Roundtable should consider strategies to harness SME investment in ways that enhance productive output, rather than persisting with barriers that dampen innovation. The fact that 60 percent of Australian SMEs plan to invest in their business in the next six months is a significant opportunity. Policymakers should act decisively to support and leverage this wave of investment for the national good.”
“Over our 35-year history, ScotPac has helped thousands of Australian SMEs unlock working capital and invest for growth. With the broadest range of customisable finance solutions, our mission is to ensure SMEs have everything they need to maximise productivity and drive Australia’s economic future,” Mr Sutton said.