MYOB has released its latest SME Performance Indicator for Australia, showing small and medium-sized enterprises remained in growth territory in the March quarter.
The report draws on anonymised data from more than 200,000 Australian SMEs between January and March. It points to a slowdown in activity towards the end of the quarter as cost pressures and economic uncertainty increased.
SME activity rose 0.6% over the quarter, while annual growth reached 4.1%, reflecting a stronger start before conditions softened in March.
Businesses faced weaker consumer spending, higher borrowing costs, and rising expenses for wages, insurance, utilities, and supply chain-related items. The figures suggest the recovery seen in late 2025 helped keep the sector growing overall, even as conditions became more difficult.
Sector split
Performance varied sharply across industries. Property Services, Professional Services, and Mining were the strongest-performing sectors in the first quarter, supported by demand tied to housing, business activity, and resources.
Retail Trade, Hospitality, and Health were among the weaker areas, with households prioritising essential spending and remaining cautious on discretionary purchases.
The employment picture remained positive overall, although labour costs continued to weigh on margins. Ongoing hiring difficulties also added pressure for many operators.
The findings broadly mirror recent official data on the wider economy, with real estate-related activity standing out in the SME market. They also point to a more uneven trading environment as 2026 progresses.
MYOB linked some of the recent uncertainty facing businesses to heightened international tensions and volatility in global energy markets. It said that combination could add further pressure through transport, logistics, and supply chains for the rest of the year.
The report also argued for more government support for smaller businesses as they contend with higher costs, softer demand, and a more difficult policy setting.
The 2026-27 Federal Budget included measures aimed at business confidence, investment, and cash flow, including a permanent AUD $20,000 instant asset write-off and restored loss carry-back provisions. MYOB said those measures offered more certainty for businesses entering a tougher period.
Paul Robson, Chief Executive Officer of MYOB, said the latest results show both resilience and strain in the sector.
"As a bellwether for the broader Australian economy, SMEs are often among the first to reflect shifts in business confidence, consumer demand and economic conditions," Robson said.
"SMEs entered 2026 from a stronger position following the recovery seen through the latter half of last year, but conditions became more challenging as the March quarter progressed. The resilience SMEs built over recent quarters will be important as they navigate what is shaping up to be a more demanding operating environment."
Robson said policy settings would matter as operating conditions become more difficult for owners and managers.
"This year in particular, practical support from government will be important," he said.
"SMEs need confidence to invest, clarity as tax settings evolve, and measures that help them manage cash flow, capability and compliance in a tougher environment. That means backing productivity, digital adoption and access to trusted advice. Together, these help small businesses improve efficiency, manage rising costs and make confident investment decisions, while greater policy certainty gives owners the confidence to plan for growth despite ongoing economic volatility."
The report said businesses that continue investing in productivity, technology, and operational efficiency are likely to be better placed as conditions remain mixed across industries and margins stay under pressure.