SMB Confidence In Federal Budget Has Softened But AI Investment Tops The Wishlist, Xero Data Shows

Small business confidence that the Federal Budget will address their challenges has dropped from 94 per cent in February to 74 per cent in April, according to new survey data from Xero.

Only 35 per cent of small businesses described themselves as “highly confident” the Budget would tackle their business challenges, based on the April results.

The data, drawn from a survey of 500 Australian small businesses commissioned by Xero and conducted by One Picture in April 2026, captures responses from businesses beyond the Xero customer base across a range of sectors and job roles.

AI incentives top the list of requests

When asked what they wanted most from the government, small businesses put incentives to invest in AI at the top of the list, chosen by 23 per cent of respondents.

Support on late payments to small businesses came second at 19 per cent, followed by a reduction in red tape at 18 per cent.

The results suggest that while confidence in the Budget has softened, small businesses remain focused on growth and are looking for targeted, practical forms of support rather than broad stimulus measures.

Productivity tools and training in demand

Beyond AI incentives, businesses indicated they need more support to unlock productivity gains and return on investment from technology.

When asked what would help, 20 per cent of respondents pointed to trusted marketplaces of recommended tools, 19 per cent wanted tax incentives for digital investment and 16 per cent called for free training and education.

The findings point to a gap between small business appetite for digital tools and the support structures available to help them adopt and benefit from those tools.

Confidence has shifted since February

The drop in confidence is notable given the starting point. In February, Xero surveyed small businesses with employees and found 94 per cent were confident the Budget would address their challenges.

The April survey, which broadened the sample to include sole traders alongside employer businesses, returned a figure of 74 per cent – still a majority, but a marked decline over a six-week period.

Xero calls for targeted Budget measures

Angad Soin, Managing Director ANZ and Global Chief Strategy Officer at Xero, acknowledged the dip in confidence but argued small businesses remain hopeful.

“Small businesses’ confidence in the Federal Budget has waned slightly over the past six weeks, but our research shows they are still hopeful the government will provide support,” Soin explained.

“In particular, small businesses are looking to the government to provide incentives to invest in AI, support on late payments and to reduce red tape. This Budget is an opportunity to deliver by making it easier to invest in their business.”

Soin outlined three specific areas where Xero believes the government should act.

The first is supporting the uptake of embedded AI in the software small businesses already use. Soin pointed to Canada’s Boost Your Business Technology program, which provides funding of up to CAD$15,000 to small and medium-sized enterprises adopting new digital technologies, as a model worth considering.

The second is modernising regulatory frameworks such as the Tax Agent Services Act to allow low-risk, rules-based automation that reduces administrative burden without undermining consumer protection.

The third is implementing stronger late payment rules, including mandatory payment times and late payment penalties. Soin noted that separate Xero research from February found 84 per cent of small businesses believe late payments could prevent them from complying with Payday Super obligations. Stronger regulations would help small businesses receive payments faster and meet the new Payday Super deadlines, according to Soin.

Last Updated on May 11, 2026 by Nick Ross