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While small businesses contribute more than half a trillion dollars to the Australian economy, business confidence across the sector is under pressure.
Small businesses in Australia are making a significant contribution to the economy, with their value reaching over half a trillion dollars, according to a new report by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO).
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However, business confidence is dwindling, posing challenges for these enterprises.
According to the ASBFEO, the value of small businesses to the economy surged by 15 percent in the fiscal year 2021–2022, amounting to $506 billion. This represents one-third of Australia’s GDP.
As such small businesses, which make up nearly 98 percent of all businesses in the country, play a vital role in job creation, employing 5.1 million people and supporting 42 percent of apprentices and trainees, Ombudsman Bruce Billson said.
“Small businesses are the lifeblood of our communities, and we celebrate the vital contribution they make to Australia’s prosperity, wellbeing, and community,” Mr Billson said.
However, the Small Business Matters report highlights some concerning trends, such as only 8 percent of small business owners are under the age of 30, which is half the peak seen in the mid-1970s.
Mr Billson emphasised the need to understand why owning a small business is not as appealing to younger Australians and has called for efforts to encourage and support the next generation of entrepreneurs.
“We need to replenish and nurture the next generation of entrepreneurs, value self-employment and encourage and enable smaller enterprises and the livelihoods they make possible,” Mr Billson said.
In addition, the report also showed around 43 per cent of small businesses failed to make a profit and 75 per cent of small business owners take home less than the average wage.
These statistics shed light on the financial challenges faced by small business owners in Australia
Business confidence crashes
The release of the Small Business Matters report coincided with a Business Confidence survey conducted in NSW, which reflected a concerning downward trend.
Business confidence in NSW reached its lowest point in 16 months, dropping from -53.1 in February to -70.8, due to economic uncertainty and rising costs exerting significant pressure on businesses’ balance sheets.
The survey of nearly 1,000 NSW businesses further revealed that one in four businesses plans to reduce staff numbers in the coming months, indicating the severity of the situation.
Additionally, if business conditions do not improve, one in three businesses will have to rely on increased debt to survive.
The April 2023 CreditorWatch Business Risk Index (BRI) revealed business spending remained elevated in April despite the general consensus that businesses are under pressure.
Overall business-to-business invoice trade receivables are up 36 per cent year on year due to rising inflation and trade activity resuming to “normal” post-pandemic and credit inquiries were up 139 per cent year on year.
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