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Small and medium-sized enterprises (SMEs) are the backbone of the Australian and New Zealand economies, employing 42% of Australia's workforce and 31% of New Zealand's workers.

But rising costs, weak demand, digital disruption, tariff-driven trade tensions and inflation are pushing many small businesses to the brink of failure.

A recent survey by Australia's CommBank shows nearly eight in ten Australian SMEs have grappled with cash flow issues over the past year.

Kiwibank's 2025 State of Savings Index found 52% of businesses reported stronger finances and 43% have seen higher customer spending. But these gains are mostly limited to larger firms. For many small businesses, especially sole operators, staying afloat remains the main concern.

A thriving SME sector is not only important for economic bottom lines, but also for the wellbeing of communities, innovation and competition.

Strengthening the networks that support small businesses through policy and partnerships is essential, and the government, universities, large businesses and consumers each have a role to play.

The business playing field is far from level and appears to be tilting further. Large firms seem to be strengthening their own financial position at the expense of SMEs. In Australia, for example, many now delay payments by up to 90 days, worsening cash flow problems for smaller suppliers.

Small businesses can also struggle to absorb the costs of compliance with government regulation.

The proposed "payday super" rules in Australia, for example, will require superannuation to be paid alongside wages within just seven days of payday. Set to take effect in July 2026, this shift from quarterly payments could intensify cash flow stress.

Modelling by MYOB suggests over one in five SMEs could face insolvency under the new rules, as cash flow shortages, penalties and administrative costs escalate.

Australian and New Zealand governments could better support small firms by providing tailored advice and helping them connect with the wider business ecosystem. This is particularly important for vulnerable entrepreneurs, such as immigrant business owners, who often lack networks that support access to markets, finance and information.

The United Kingdom, for example, has launched its most comprehensive small business support package in a generation. It includes faster payments, improved access to finance, reduced red tape and a new Business Growth Service - essentially a single digital "front door" for businesses to access a range of government support, advice and resources.

Policymakers in Singapore have also responded quickly to challenges facing small businesses. Amid the recent United States tariff uncertainties, the Singaporean government announced a new Business Adaptation Grant, capped at S$100,000 per firm, prioritising SMEs over larger firms.

Proactive public policy is only one piece of the puzzle when it comes to supporting SMEs in Australia and New Zealand. Universities and other higher education institutions also have a role to play - and greater collaboration can be mutually beneficial.

Working with SMEs means academic research can make a difference beyond universities while helping small firms innovate and grow.

In the UK, for example, a partnership between the University of Sheffield and a power tool company led to the development of new product lines. It also helped the university test academic theories against real-world industry problems.

Large universities in major cities such as Auckland and Brisbane do have systems in place to support the growth of entrepreneurs and their small business, helping them raise capital and providing access to new research.

But outdated perceptions of academics as being isolated in ivory towers still persist and may limit the full potential of university and industry collaboration.

Universities can also help small firms upskill. Many SMEs still lag in adopting artificial intelligence (AI), potentially limiting their productivity.

Adopting AI can also help small firms to better compete against large businesses. In the UK, the University of Bath now offers free short courses to help workers use AI, creating new opportunities for entrepreneurs and SMEs to build capability and close the adoption gap.

Creating more opportunities for partnerships between startups and large firms could also improve the small business ecosystem. There is significant value in combining the strategic advantages of larger firms, such as brand recognition and access to finance, with the agility and cutting-edge innovation of startups.

In the US, Walmart's 2025 "Grow with US" program supports SMEs with free training, mentorship, product exposure and financial tools to help them scale through its stores and online marketplace.

Customers can also help small businesses. In the UK, new government procurement rules make it easier for small firms to win public contracts. When consumers choose to buy local, even if it costs a bit more, it makes a real difference.

Australia and New Zealand would benefit, both economically and socially, from adopting more coordinated efforts to build a resilient ecosystem for small firms. Focused policy, stronger partnerships and lessons from global best practice can shift SMEs from fragility to strength.