As 2026 gets underway, there are reasons for cautious optimism to continue, according to Australia’s ANZ bank.
The effects of the RBA's first three rate cuts are yet to fully flow through to the broader economy, it says. Gross domestic product (GDP) growth is expected to reach 2.4 per cent in 2026 (up from an expected 2.1 per cent in 2025) and combined with more balanced labour market conditions and further income growth for consumers, the Bank says there's reason for business owners to hope that 2026 may be easier than the last few years.
The ANZ has outlined four key themes for business owners to look out for in 2026 as they work out how to navigate the new normal – a normal where easy wins are hard to find and continued growth requires deliberate strategy and sharp cash-flow management skills.
Smart AI adoption offers untapped efficiency gains
It's been three years since ChatGPT was first launched, and in that time, it's become increasingly clear that artificial intelligence (AI) tools are here to stay, and they're changing the way we do business.
Yet we're also discovering that AI isn't a magic bullet, and just like any other technological innovation, it requires strategic thinking and careful implementation to ensure you're getting positive returns from your effort and outlay.
The Australian Government's AI Adoption Tracker shows that there's a significant adoption gap between small-to-medium enterprises (SMEs) with more than 20 employees (68 per cent report having already started using AI) and those with less (35 per cent).
While this speaks to the time and resource constraints faced by smaller businesses, it also suggests an untapped opportunity for business owners to start finding new efficiencies through the strategic use of AI.
For companies using the technology, some of the ways they're seeing positive outcomes from AI include having access to higher-quality data (71 per cent definitely or possibly agree), enhanced marketing activities (68 per cent), increased productivity (66 per cent) and better customer engagement (65 per cent).
Preserving profitability in a price-sensitive market
Costs for businesses remain elevated, with key costs including electricity (up 4.8 per cent quarter on quarter from annual re-pricing reviews) and wages (3.4 per cent year on year) growing. Oil prices are also likely to rise in the near term, while the AUD may also rise a little, helping the costs of imports.
Funding rates for both growth and cash management are also an issue. Despite the drop in the official cash rate from 4.35 per cent to 3.6 per cent, the average small business loan interest rate is close to seven per cent and has only reduced by around 0.5 per cent since its recent peak, adding another burden to already stretched business budgets. ANZ Research forecasts a further 0.25ppt cash rate cut from the RBA, in the first half of 2026.
Despite these pressures, most business owners remain wary of raising prices for fear of losing customers to competitors. Their concerns about customer price sensitivity may be justified: a recent PwC survey of consumers found that 55 per cent of Australians feel financially insecure and 74 per cent identifying the rising cost of living as a major concern. The RBA's business liaison program notes that "Consumers remain cautious in their spending, which [firms] see as constraining a more pronounced lift in consumption growth, particularly for mid-tier retailers."
So, the question becomes: how can you preserve your margins while keeping your customers loyal? Here are a few strategies to consider:
* Reach out to suppliers and utilities to try and lock in favourable rates in exchange for your ongoing business.
* Create value-add categories such as express turnaround and special requests. If your business supports it, consider adding a discounted subscription tier.
* Analyse your offerings to identify low-profit items and services and consider removing them or finding new ways of sourcing the products.
* Make sure your cash flow forecast is comprehensive and up to date. AI could be useful in helping to identify possible efficiencies.
Targeted marketing can unlock new growth opportunities
Between COVID and the cost-of-living crisis, both businesses and customers have been on the back foot for years. Few businesses are reporting strong revenue growth, with many describing challenging or subdued market conditions.
However, there are early signs that the cuts to the cash rate are starting to have a positive impact on spending habits (household spending is up dive per cent since August 2024) and consumer confidence.
This suggests that there may be new opportunities for customer growth – if you're able to find your customers in a fragmented and increasingly competitive advertising landscape.
Major digital advertising platforms like Meta and Google are leveraging AI to make it easier than ever for business owners to create and target assets to their key demographics. However, this comes with increased competition between advertisers and a concurrent increase in customer acquisition costs (CAC).
Take this as a chance to revisit your marketing strategy. Are you talking to the right people? Does your product or service still resonate with your existing customers? How can you tailor your unique selling proposition (USP) to meet growing demand for local, sustainable and ethical businesses? Are there any opportunities for organic growth?
As you reach out to new customers, it's also worth considering your customer journey and whether you can tailor it to boost loyalty and create sources of recurring revenue. The costliest part of any customer journey is acquisition, so you want to ensure you're maximising the lifetime value of those customers you do have (a figure known as LTV). Most business analysts suggest aiming for a CAC:LTV ratio of at least 1:3, so that for every dollar you're spending on acquiring a customer you can expect $3 in lifetime return.
Regulatory changes bring both support and new compliance burdens
There was some relief for small business in the 2025 Budget, with more than $2 billion in targeted supports for small business, along with $800 energy bill rebates and millions in energy efficiency grants. The Stage 3 tax cuts are also thought to be benefitting around 1.5 million sole traders.
More broadly, the government is preparing new legislation to clamp down on unfair business practices and protect small business owners when they engage and compete with larger businesses. It's expected that the laws will extend already existing protections for consumers to small businesses so that they can push back against unfair contract and payment terms. While still in consultation, the government expects to introduce the legislation in 2026.