During the 2015 federal budget, the Australian Government labelled small businesses as the ‘engine room of the Australian economy’ – driving growth and creating jobs.

A year on, the federal government solidified that moniker. They handed further tax cuts to small business owners and increased the revenue threshold to include a further 60,000 businesses not previously eligible for lower taxes and asset deductions.

2016_MAY_AUS_MONEY - Facts about how important small businesses are to the AU economy

Though the impact of these changes will vary, the recent focus on incentivising Australians to start a business, or grow their existing one, has shown how important the sector is to the Australian economy. Small business have proved to be the powerhouse of the Australian economy, statistically speaking, time and time again.

As part of Xero’s challenge to assist and empower small businesses, it’s our responsibility to understand the real and ongoing picture of small businesses in Australia. We do this through a growing body of anecdotal stories of how our customers grow, as well as statistics. For moving measurable trends, we look to research from respected independent entities including the Australian Bureau of Statistics, The Treasury, and the Department of Industry, Innovation and Science.

It’s become well-accepted in recent years that our economy stands on the ideas and execution of hard-working small businesses. But these five facts from some of Australia’s most recent reports help shine a statistical spotlight on the real impact that small businesses have on the Australian economy.

The percentage of small businesses in Australia

According to the most recent Small Business Data Card report, conducted by The Treasury in June 2014, small businesses make up 97% of all businesses in Australia. Of the 2,079,626 businesses operating in Australia in 2012–2013, 2,025,066 of them were small businesses.

The number of people small businesses employ

The same report showed that small businesses employed around 4.5 million people in 2012–13. This means that small businesses are responsible for approximately 43 per cent of all private-sector employment.

The average age of an Australian business

Every year the Department of Industry, Innovation and Science conducts an Australian Innovation System Report. According to its most recent findings, Australia is globally distinct in terms of its high share of small business startups (up to two years old), with more than 16 per cent of small businesses fitting this description. Only Brazil was found to have a larger number of small business startups or businesses under the age of five during the 2001–11 decade.

Those startups are a major driver of productivity and employment too — startups less than two years old added 1.44 million full-time-equivalent jobs between 2006 and 2011, while the rest of the economy shed more than 400,000 jobs.

The increased number of actively trading businesses

The Australian Bureau of Statistics (ABS) showed that the number of actively trading businesses in the market sector in June 2015 had increased by 1 per cent from June 2014 levels. Mike Booth from the ABS has been quoted as saying: “Although there was actually a small drop in the number of new business registrations, fewer businesses closed, giving a total rise of one per cent in business numbers – an additional 21,000 businesses for 2014–15.”

How small businesses contribute to the economy

And most important of all, is what impact our 2 million small businesses have on the economy. Statistics compiled by the Parliamentary Library found small businesses contributed 33.1 per cent of total industry value added to the Australian economy in 2013–14. This has actually reduced slightly, from 40.5 per cent in 2006–07, but Australian small businesses remain a core part of our economy and something that we can’t survive without.

Marina Holmes Xero

Xero is beautiful, easy to use online accounting software for small businesses and their advisors. Xero provides business owners with real-time visibility of their financial position in a way that’s simple, smart and secure.
Xero has over 700,000 customers in more than 180 countries around the world and is listed on the NZX and ASX.