Nearly half of all Australian businesses are actively innovating, yet the share has held steady at 46% for two consecutive survey periods. What has changed dramatically is what they are doing. AI adoption jumped from 1% of businesses in 2022–23 to 12% in 2024–25, and the industries where that shift is happening tell you where the next big ideas are coming from. Not from a single sector, but from a split between digital acceleration and deep transformation in resources, agriculture, and clean technology.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
These four numbers frame the real picture. Innovation is not stalled, but it is uneven. The businesses that are pushing ahead tend to be the ones that have addressed the skills problem, found a way through uncertainty, or operate in industries where the payoff is immediate. The rest are stuck between rising costs and a shortage of the right people. Here’s what you actually need to know.
Four Things to Understand About Innovation in Australian Business Right Now
The ABS defines a business as innovation-active if it introduced or developed an innovation during the reference period, or had one still in development or abandoned. That is a broad net, and it matters because the data captures intention and effort, not just successful launches.
What I tend to notice is that the businesses getting real traction are the ones treating innovation as a repeatable process rather than a one-off project. The innovation imperative is not about having one bright idea — it is about building the habits that produce them consistently.
What Changes When Innovation Gets Ignored
The most telling figure in the research is not about innovation itself. It is that 42% of businesses report that uncertainty about economic conditions significantly hampered their general business activity, up from 36% two years earlier. Uncertainty does not just freeze investment — it stops businesses from even attempting the kind of experimentation that leads to new ideas. When you combine that with the 30% who say lower profit margins to remain competitive are hurting them, up from 21%, you get a picture of businesses squeezed from both sides.
The cost of inaction shows up in several ways. Supply chain disruptions affected 59% of businesses, and 15% said those disruptions significantly hampered performance. Businesses that did not invest in supply chain training — only 18% have — left themselves exposed to the same disruptions repeating. Meanwhile, the businesses that did train staff in supply chain practices nearly doubled that share from 11% in 2021–22 to 18% in 2024–25, suggesting those that acted saw a reason to keep going.
The gap between the businesses that innovate and those that do not is widening. Among innovation-active businesses, AI adoption is 20%. Among non-innovation-active businesses, it is 6%. That gap compounds. The businesses already innovating are the ones picking up the tools that will let them innovate faster.
Where Businesses Get Innovation Wrong
Treating Skills Shortages as a Hiring Problem Alone
Thirty-five per cent of businesses report a skills shortage, but only 26% have invested in upskilling or reskilling existing employees. The most common response — used by 38% — is increasing on-the-job or internal training. That is sensible, but 15% of businesses experiencing shortages took no action at all. The trades shortage (13% of businesses) and the sales and marketing gap (7%) are not going to solve themselves. What I would do is look at the 57% of businesses that cite a need for specialist skills and ask whether those specialists really need to be employees, or whether external business advice can cover the gap while you build internal capability.
Not Measuring the Impact of Digital Investment
Only 7% of businesses measure the contribution of digital activities to overall performance. That is up from 3% in 2021–22, but it still means 93% of businesses have no idea whether their digital spending is paying off. Without measurement, you cannot tell which tools are driving results and which are just adding cost. The share of businesses actively collecting or analysing data to make decisions actually fell from 24% to 10% between surveys, which suggests many businesses tried it and stopped rather than built it into operations.
Ignoring Cyber Security Until Something Happens
Twenty-one per cent of businesses experienced a cyber security incident in 2024–25, and 28% still have no measures in place to prevent one. Among those adversely impacted, 36% lost time, 18% lost money, and 17% had service downtime. The average cost per incident for large businesses has reached $202,700, a 219% increase. For a small business, even a fraction of that can be crippling. A basic business VPN and remote-work security setup is a low-cost starting point that covers one of the most common entry points for attackers.
Overlooking the Barriers That Are Actually in Your Control
The top barriers to innovation are lack of access to funds (19%), lack of skilled workers (16%), and lack of skilled persons within the business (14%). Cost of development (13%) and uncertain demand (9%) round out the list. What stands out is that two of the top three are about people, not money. Businesses that focus only on funding are missing the bigger problem. The businesses that are innovating successfully tend to be the ones that have addressed the skills gap first, then looked for capital.
Where the Next Big Ideas Are Actually Coming From
The research points to three distinct streams of innovation in Australian business, and they do not all look like a tech startup. Understanding which stream fits your business is more useful than chasing the latest trend.
AI and Digital Transformation — The Fastest-Moving Stream
AI adoption has gone from 1% to 12% in two years. In the Information, Media and Telecommunications sector, it sits at 38%. The businesses using AI are not all building their own models — most are applying existing tools to specific problems. Forty-nine per cent of industry leaders plan to increase technology investment, making it the top investment priority. The businesses that are getting value from AI are the ones that started with a clear problem rather than a fascination with the technology. A practical entry point is using AI for customer-facing tasks: 34% of businesses report that ICT use improved responsiveness to customer needs, up from 31%. Tools like AI-powered content and ad creation platforms let small businesses test the waters without a major commitment.
Clean Technology and the Green Energy Transition
Eighteen per cent of businesses use at least one form of clean technology. The barriers are cost (16%), lack of information (11%), and lack of time or staff (10%). But the structural drivers are powerful. Nine wind and solar projects added 2.1 gigawatts in a single quarter of 2025, and renewables now supply more than half of electricity through the National Electricity Market. Fifteen wind projects are under construction nationally, representing over $12 billion in investment. For businesses that supply, service, or operate in these industries, the opportunity is not in building wind farms — it is in the supply chain, logistics, and compliance services around them. The shift toward eco-friendly business models is being driven by infrastructure spending, not just consumer sentiment.
Resources and Agriculture — The Unexpected Innovation Leaders
Seven of the top ten fastest-growing industries in 2026 are export-focused, and five are tied to critical minerals and the green energy transition. Tree nut growing leads at 29.7% revenue growth. Lithium mining, uranium mining, and battery material mining all feature in the top ten. Australia holds more certified organic farmland than any other country — around 53 million hectares — and organic crop farming is projected to grow 19.8% in 2026. The innovation in these sectors is not about digital products. It is about process innovation in extraction, farming, and supply chain management. For service businesses, the growth is in accounting, compliance, and logistics support for these industries, particularly in Western Australia, South Australia, and Queensland.
→ Scroll right to see all columns
| Industry | Innovation-active (%) | AI adoption (%) |
|---|---|---|
| Information, Media & Telecom | 63% | 38% |
| Manufacturing | 58% | — |
| Professional, Scientific & Technical | 52% | — |
| Construction | 35% | — |
| Agriculture, Forestry & Fishing | 34% | — |
What the Industry Data Tells You About Where to Focus
The table above shows that innovation activity varies massively by sector. Information, Media and Telecommunications leads at 63%, while Agriculture sits at 34%. If you are in a lower-innovation industry, the opportunity may be in adopting what higher-innovation sectors already do. If you are in a higher-innovation industry, the risk is spreading too thin across too many experiments. The businesses that measure digital contribution — only 7% do — are the ones that can tell which experiments are worth scaling.
Frequently Asked Questions
What counts as innovation for the ABS survey? ▾
How do small businesses compare to large ones on innovation? ▾
Is collaboration important for innovation? ▾
What is the main reason businesses do not adopt clean technology? ▾
How many businesses measure whether their digital spending works? ▾
What is the biggest external barrier to innovation right now? ▾
Innovation Is Not a Single Industry — It Is a Set of Decisions
The data makes one thing clear: the next big ideas are not all coming from the same place. Some are emerging from AI tools embedded in everyday business operations. Others are coming from farms and mines that have been operating for decades but are adopting new processes. The common thread is not the sector — it is the decision to treat innovation as something you measure, resource, and repeat. The businesses that are pulling ahead are the ones that have addressed their skills gap, found a way to work through uncertainty, and picked one or two areas to focus on rather than trying everything at once.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read How to Scale a Small Business in Australia Without Massive Capital.
Sources and Further Reading
The Innovation Imperative: How Australian Businesses Can Stay Ahead of the Curve — A deeper look at building repeatable innovation habits rather than chasing one-off ideas.
Beyond the Bottom Line: Prioritising Employee Wellbeing in Australia — How workforce wellbeing connects to skills retention and innovation capacity.
Australian Bureau of Statistics (2025). Characteristics of Australian Business, 2024–25. 🔗
Australian Industry Group (2026). Australian Industry Outlook 2026. 🔗
Scalesuite (2026). Australia’s Fastest-Growing Industries 2026. 🔗
Australian Bureau of Statistics (2024). Innovation in Australian Business, 2022–23. 🔗
