The AI edge for small business: Increased SMB AI adoption can add $44 billion to Australia’s economy – Deloitte

Enhancing Economic Performance and Sustainable Development through AI Adoption in Small and Medium-sized Businesses (SMBs)

The Role of SMBs in Achieving SDG 8: Decent Work and Economic Growth

A recent report highlights the critical role of Small and Medium-sized Businesses (SMBs) in Australia’s economy and their potential to advance Sustainable Development Goal 8 (Decent Work and Economic Growth). However, a significant productivity gap between SMBs and larger enterprises currently impedes progress towards national economic targets.

• SMBs contribute over 50% of the private sector GDP.
• SMBs generate 60% of company profits.
• A persistent productivity lag in this sector hinders broader economic performance and the achievement of inclusive growth.

Artificial Intelligence (AI) presents a transformative opportunity to close this gap. By leveraging AI, SMBs can significantly increase efficiency, drive innovation, and stimulate sustainable economic growth, directly contributing to SDG Target 8.2, which calls for higher levels of economic productivity through technological upgrading and innovation.

Barriers to AI Integration and Progress on SDG 9: Industry, Innovation, and Infrastructure

Despite enthusiasm for AI, SMBs face five common barriers that limit their capacity for technological adoption, thereby challenging the objectives of SDG 9 (Industry, Innovation, and Infrastructure). Overcoming these is essential for building a resilient and innovative business ecosystem.

1. Lack of Foundational Knowledge: A primary obstacle is a lack of awareness regarding AI applications. One-third of non-adopting businesses report not knowing where to start, indicating a need for greater knowledge dissemination to foster widespread innovation.
2. Business System and Data Limitations: Inadequate technological infrastructure and data quality prevent SMBs from scaling AI solutions. This highlights an infrastructure gap that must be addressed to support the technological upgrading central to SDG 9.
3. Workforce Skills Deficit: The report reveals a critical skills gap, with over half of SMB workforces possessing only basic AI familiarity. This barrier underscores the need for targeted educational and training initiatives aligned with SDG 4 (Quality Education) to prepare the labour force for an AI-driven economy and ensure decent work for all (SDG 8).
4. Funding and Investment Constraints: Financial limitations restrict the ability of SMBs to invest in the innovative technologies required for sustainable industrialization. While willing to invest, tighter budgets necessitate clear returns, posing a barrier to large-scale AI adoption.
5. AI Governance and Standards: A lack of clear industry guidelines for ethical and responsible AI use creates uncertainty. Establishing effective governance is crucial for fostering trust and encouraging adoption, but must be balanced to avoid creating prohibitive regulatory burdens for smaller entities.

A Proposed Policy Framework to Foster Inclusive Innovation

To accelerate AI adoption and advance multiple SDGs, the report proposes a strategic government intervention aligned with SDG 17 (Partnerships for the Goals). This public-private partnership aims to stimulate investment in technology and innovation (SDG 9) and reduce economic inequalities between small and large businesses (SDG 10).

The core recommendation is a time-limited $1 billion AI investment boost for businesses with an annual turnover below $50 million, structured as a 50% tax deduction. This policy is projected to unlock $2 billion in private sector investment, targeting key areas to overcome the identified barriers:

• Skills Training: Directly addresses the workforce skills deficit, promoting lifelong learning opportunities (SDG 4).
• AI Products and Services: Lowers the financial barrier to entry, enabling access to innovative tools.
• Enabling Business Systems and Infrastructure: Supports the foundational upgrades necessary for technological advancement (SDG 9).

Analysis of Sustainable Development Goals (SDGs) in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 4: Quality Education – The article highlights a significant skills gap in the workforce of Small and Medium-sized Businesses (SMBs) regarding Artificial Intelligence (AI), emphasizing the need for training and upskilling.
• SDG 8: Decent Work and Economic Growth – The central theme is boosting the economic productivity of SMBs, which are major contributors to Australia’s GDP, through the adoption of AI to close the productivity gap with larger enterprises.
• SDG 9: Industry, Innovation, and Infrastructure – The article focuses on overcoming barriers to technology adoption (AI) for SMBs, promoting investment in new business systems and infrastructure, and fostering innovation within this crucial sector of the economy.

2. What specific targets under those SDGs can be identified based on the article’s content?

• SDG 4: Quality Education

  • Target 4.4: “By 2030, substantially increase the number of youth and adults who have relevant skills, including technical and vocational skills, for employment, decent jobs and entrepreneurship.”
    
    Explanation: The article directly addresses this target by identifying the “Workforce skills” gap as a major barrier. It states that “More than half of SMB workforces have basic or novice levels of familiarity with AI” and calls for making “AI education and training more readily available to boost AI literacy across the labour force.” The proposed tax deduction specifically targets investment in “specific skills training.”

• SDG 8: Decent Work and Economic Growth

  • Target 8.2: “Achieve higher levels of economic productivity through diversification, technological upgrading and innovation…”
    
    Explanation: The article’s core argument is that AI adoption offers a “powerful way for SMBs to increase efficiency and drive economic growth.” It aims to close the “productivity gap” between SMBs and larger enterprises through technological upgrading, which directly aligns with this target.
  • Target 8.3: “Promote development-oriented policies that support productive activities… and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial services.”
    
    Explanation: The proposed policy of a “$1 billion AI investment boost for small businesses via a 50% tax deduction” is a clear example of a development-oriented policy designed to support and encourage investment and growth in SMBs.

• SDG 9: Industry, Innovation, and Infrastructure

  • Target 9.3: “Increase the access of small-scale industrial and other enterprises… to financial services, including affordable credit, and their integration into value chains and markets.”
    
    Explanation: While the context is a developed country, the principle of increasing SMB access to finance is central. The article notes that SMBs “often face tighter budgets,” and the proposed tax deduction acts as a financial incentive to lower the barrier to investment in technology, thereby increasing access.
  • Target 9.b: “Support domestic technology development, research and innovation… including by ensuring a conducive policy environment…”
    
    Explanation: The article advocates for a conducive policy environment (the tax deduction) to support domestic technology adoption and innovation within SMBs. It addresses barriers like “Business systems and data quality limitations” and aims to stimulate investment in “AI products, services, business systems and infrastructure that enable AI adoption.”

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• For SDG 4 (Target 4.4)

  • Indicator: Proportion of the SMB workforce with advanced AI skills.
    
    Explanation: The article provides a baseline for this indicator, stating that “just 10% have advanced AI skill levels.” Progress would be measured by an increase in this percentage.
  • Indicator: Investment in AI-specific skills training.
    
    Explanation: The proposed tax deduction is specifically for investments including “specific skills training.” Tracking the uptake of this part of the deduction would measure progress.

• For SDG 8 (Targets 8.2 & 8.3)

  • Indicator: Productivity per hour worked in SMBs.
    
    Explanation: The article identifies a “productivity gap” and notes that SMBs “lag larger enterprises in productivity per hour worked.” Measuring the change in this metric would directly assess progress towards the goal of increasing efficiency.
  • Indicator: Total value of new investment in AI by SMBs.
    
    Explanation: The article explicitly suggests that the proposed policy “could unlock $2 billion of SMB investment in the short term,” providing a clear monetary indicator to track.

• For SDG 9 (Targets 9.3 & 9.b)

  • Indicator: Proportion of SMBs adopting AI technologies.
    
    Explanation: The article implies a baseline by stating that “One-third of the businesses not currently using AI say they don’t know where to start.” An increase in the proportion of SMBs using AI would be a direct measure of progress in technology adoption.
  • Indicator: Number of SMBs utilizing the proposed AI investment tax deduction.
    
    Explanation: The success of the proposed policy to increase access to finance for technology investment would be measured by how many businesses make use of the incentive.

4. Table of SDGs, Targets, and Indicators

Source: deloitte.com