Bridging the AI Adoption Gap: Why Australian Small Businesses Must Embrace AI

May 29 / Dr Peter W. Beven

In the rapidly evolving landscape of technology, artificial intelligence (AI) stands out as a transformative force reshaping industries worldwide. It is clear that Australian small businesses in particular are struggling.

While AI adoption among small businesses in the United States surges ahead, Australian small businesses lag significantly behind, with only 20% incorporating AI into their operations compared to nearly 48% in the US. This discrepancy underscores a critical need for Australian enterprises to accelerate their AI adoption to stay competitive, enhance efficiency, and deliver superior customer experiences.

The AI Adoption Landscape: US vs. Australia

Research data from the Small Business and Entrepreneurship Council highlights a significant trend: nearly half (48%) of small businesses in the United States have embraced AI[1].

This widespread adoption is driven by the clear benefits AI offers in streamlining operations, reducing costs, and enhancing customer service. In stark contrast, best indicators from the likes of the National Australia Bank and MYOB reveals that only around 20% of Australian small businesses have ventured into the AI space[2].

This considerable gap raises concerns about the competitive edge and future sustainability of Australian enterprises.

Competitive Advantage of AI

AI offers a multitude of advantages that can significantly enhance the competitiveness of small businesses. One of the primary benefits is cost reduction. By automating routine tasks, businesses can reduce labour costs and minimise human error. For instance, AI-powered chatbots can handle customer inquiries 24/7, freeing up human resources for more complex tasks and reducing the need for extensive customer service teams.

Additionally, AI improves operational efficiency by optimising processes. Machine learning algorithms can analyse vast amounts of data to identify patterns and predict future trends, enabling businesses to make data-driven decisions. This capability is particularly valuable in areas such as inventory management, where AI can predict demand and optimise stock levels, reducing storage costs and minimising waste.

Moreover, AI enhances the quality of customer service. Personalisation, driven by AI, allows businesses to offer tailored experiences to their customers. AI can analyse customer behaviour and preferences to provide customised recommendations, improving customer satisfaction and loyalty. In an era where customer experience is a key differentiator, AI-driven personalisation can give businesses a significant edge.

The Australian Context: Challenges and Opportunities

Several factors contribute to the slower adoption of AI among Australian small businesses. These include a lack of awareness about AI's potential benefits, limited access to AI expertise, and concerns about the cost of implementation. However, these challenges are not insurmountable.

Small business must not wait for, and rely on, government to support them in their journey. While government initiatives and industry collaborations can play a pivotal role in bridging the knowledge gap and providing the necessary resources for AI adoption, they are often too slow not targeted to real-world needs and accompanied by significant administrative burdens.

Programs that offer training and support for small businesses can demystify AI and demonstrate its practical applications. Additionally, partnerships with technology providers can help small businesses access affordable AI solutions tailored to their specific needs.

The Way Forward: Accelerating AI Adoption

To remain competitive on the global stage, Australian small businesses must embrace AI more rapidly.

Here are some actionable steps:

Increase Awareness and Education: Business owners and managers need to be educated about the tangible benefits of AI. Workshops, seminars, and online courses can help demystify AI and showcase successful case studies.

Identify the Right Opportunity: Given most small business are time and resources poor, they need to focus on the right opportunity – what can they apply AI to that maximises improvements in efficiency and reducing costs.

Leverage Taxation Benefits: While government tax incentives can provide financial incentives through tax deductibility of AI adoption, the extent to which small businesses can rely on the R&D Tax Incentive is limited. As this only extends to those investing in the development of new AI products and services for commercialisation (as distinct from adoption), the average small business can obtain little, if any’ value from this incentive.

Start Small and Scale: Small businesses can begin their AI journey with pilot projects that address specific pain points. Successful pilots can then be scaled up, demonstrating the value of AI and building confidence in its broader application.

Foster Collaboration: Collaborations between businesses, industry bodies, technology providers, and educational institutions can create an ecosystem that supports AI innovation. These partnerships can offer small businesses access to cutting-edge technologies and expert guidance.

Australian Government Support

Apart for certain taxation benefits, there is very little joy for small and medium sized enterprises across the economy from the the Federal government. While the recent announcement of $16.3M for new AI Adopt Centres is welcome - its is woefully too little and too late! Despite the fact that the the CSIRO indicates that the adoption of 'generative AI' alone could contribute $115 Billion to the economy by 2030, the Federal government has slashed its investment from the $44 Million in support proposed by the previous government to a measly $16.3 Million!

Government needs to seriously get its act together in support of AI or totally reinvent the R&D Tax Incentive scheme to make it broader and more applicable to small businesses. 


The disparity in AI adoption between US and Australian small businesses highlights a critical need for change. By embracing AI, Australian enterprises can unlock significant benefits in cost reduction, operational efficiency, and customer service quality. With the right support and a proactive approach, Australian small businesses can harness the power of AI to drive growth, innovation, and competitiveness in the global market.

The good news is that industry bodies such as the Australian Information Industry Association and the Australian Industry Group, through their partnership with iEC Professional other industry partners and universities, will see a number of new industry-driven initiatives emerge to help business in their AI adoption journey.

One such initiative is the AI Ready Microcredential course supported by the Queensland Government through the AIIA that will see 650 QLD businesses be supported to develop their first AI application and receive coaching by industry experts. 

The time to act is now.