Small Business Finance :: News
SHARE

Share this news item!

KPMG Forecasts Economic Hurdles for Australian SMEs Amid Rising Costs

Analyzing the Impact of Sluggish Growth on SME Profitability

KPMG Forecasts Economic Hurdles for Australian SMEs Amid Rising Costs?w=400

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

Australian small and medium-sized enterprises (SMEs) are facing a challenging economic landscape, as outlined in KPMG's Quarterly Economic Outlook released in July 2024.
The report projects sluggish economic growth coupled with rising operational costs, factors that could significantly compress profit margins and impede business expansion for SMEs.

Key projections from the report include GDP growth hovering around the mid-1% range for the remainder of 2024, with unemployment expected to rise from the current 4.2% to 4.7% by mid-2026. Although wages growth remains high, it has peaked and is anticipated to soften, while inflation is projected to decrease from 3.8% to 2.7% by the end of next year. The cash rate is expected to remain unchanged throughout 2024, with a potential rate cut in the first quarter of 2025.

Dr. Brendan Rynne, KPMG’s Chief Economist, highlighted that the Australian economy narrowly avoided recession this year, with 0.1% growth in the March quarter and an annual growth rate of just 1.1% over the past 12 months. Excluding the pandemic period, this represents the weakest growth in over twenty years.

Households continue to struggle with increases in the general cost of living, evident in the fall in the household saving ratio in the first half of 2024. This is due to gross disposable income lagging behind the rise in consumption costs, although prices for goods are expected to soften in line with easing domestic demand.

Renters have faced strong rent rises, while those with mortgages manage higher loan repayments. These factors suggest that headwinds to household consumption will persist in the second half of 2024, as interest rates are now expected to stay higher for longer. Inflation remains sticky, while households draw down on their savings buffers.

The gradual slackening in the labour market will reinforce downward pressure on household consumption. The Reserve Bank of Australia will also be concerned about stagnant levels of productivity growth being outpaced by wages growth, although this is now starting to soften.

For SMEs, these economic indicators necessitate a cautious approach to financial planning and investment. Businesses are advised to closely monitor cash flow, explore cost-saving measures, and consider diversifying revenue streams to mitigate the impact of economic headwinds.

In conclusion, while the economic outlook presents challenges, proactive financial management and strategic planning can help Australian SMEs navigate this period of uncertainty and position themselves for future resilience and growth.

Published:Sunday, 26th Oct 2025
Author: Paige Estritori

Please Note: We do not endorse any specific products or companies. Some content is sourced from third parties, including press releases, and may not be independently verified for accuracy or completeness.

Share this news item:

Rate this article

0 Comments

No comments yet. Be the first to share your thoughts.

Finance News

Why ATO Interest Changes Matter for Small Business Finance
Why ATO Interest Changes Matter for Small Business Finance
25 Jul 2026: Paige Estritori
Australian small businesses carrying tax debt face a sharper cash flow test as the after-tax cost of ATO interest becomes harder to absorb. From the 2025-26 income year, general interest charge and shortfall interest charge amounts incurred on tax debts are no longer deductible. For SMEs that have relied on payment plans as a temporary buffer, the change makes delayed tax payments more expensive in real terms. - read more
Why Cash Flow Discipline Matters as SME Insolvency Warnings Rise
Why Cash Flow Discipline Matters as SME Insolvency Warnings Rise
18 Jul 2026: Paige Estritori
Australian small businesses are being urged to treat cash flow management as a board-level priority as restructuring specialists warn insolvency pressures may rise through FY26-27. The message is not simply that conditions are difficult. It is that delayed decisions can quickly narrow the choices available to directors, particularly where tax debts, weaker margins and high borrowing costs are already in play. - read more


Business Loans Articles

Essential Steps to Launching Your Start-Up Successfully
Essential Steps to Launching Your Start-Up Successfully
Welcome to our comprehensive guide on the essential steps to launching your start-up successfully. Whether you're a budding entrepreneur or an experienced business owner looking to refine your approach, having a solid plan in place is crucial for success. - read more
Creative Financing Solutions for Aussie Businesses to Boost Working Capital
Creative Financing Solutions for Aussie Businesses to Boost Working Capital
Working capital is the lifeblood of any business, serving as the catalyst for sustainability and growth. For Australian businesses, maintaining a healthy level of working capital ensures that operations run smoothly and expansion opportunities can be seized without delay. The ability to meet short-term liabilities, invest in product development, and respond to market demands hinges on this critical financial metric. - read more


Need Help Finding a Loan?
Business Loan Quote
Loan Amount:
Postcode:

All quotes are provided obligation-free by a participating broker from our national referral partner network. We respect your Privacy.

All finance quotes are provided free (via our secure server) and without obligation.
We respect your privacy.

Knowledgebase
Mortgage Broker:
A person or company that acts as an intermediary between borrowers and lenders, but does not lend money directly.