The 2023 Small Business Data Report, prepared by the Council of Small Business Organisations Australia (COSBOA) and Square Australia, highlights the challenges faced by Australia’s small business sector, amid a turbulent economic landscape.
The report indicates a significant slowdown in consumer spending and notable shifts in consumer behaviour. While most industries still show year-on-year sales growth, the pace has slowed compared to the post-COVID boom of 2021-2022.
2023 saw an inversion of fortunes for the sectors that thrived during the pandemic such as home repair and home gym set-ups. Despite early successes in entertainment and transportation, the report provides evidence of a downturn in spending across all sectors.
On a positive note, the research noted that future consumer spending sentiment will be strongest in 2024 across three sectors: travel and experience, food and drink and entertainment.
Luke Achterstraat, CEO of COSBOA, said that the research underscores the harsh reality for small businesses.
“For Australian small businesses, 2023 has been a year marked by operational hurdles, dynamic market entries and exits whilst grappling with rising interest rates, inflation, and cost of living pressures impacting business and their customers,” Achterstraat said.
“Small businesses are resilient, but the challenges are real,” he added. “We must recognise the changing dynamics and consumer sentiments and work towards policies that steer Australia towards recovery and sustainable growth.”
The report also looked at business growth during the past year and found a 2.3 per cent increase in non-employing businesses, a 3.5 per cent decrease in businesses with one-four employees, and a 1.8 per cent increase in businesses employing between five-19 people. SMEs and mid-market businesses are approaching growth rates closer to their micro-business counterparts who have thrived at the height of the pandemic.
In terms of business entries and exits, the report revealed an entry rate of 15.8 per cent for the 2022-23 financial year while the exit rate stands at 15 per cent which signifies a positive net change in the number of businesses.
The Australian Bureau of Statistics (ABS) also noted in a recent report a 0.7 per cent decrease (2,900 vacancies) in job openings during the three months leading up to November 2023, as per seasonally adjusted figures, highlighting a decline in businesses’ intentions to expand their workforce in 2024 compared to the preceding year.
“While there is a decrease in job vacancies for the sixth consecutive quarter, it is crucial to note the broader context,” Achterstraat explained. “The data reveals that job vacancies were still 70.8 per cent higher than the pre-pandemic levels observed in February 2020. This sustained elevation is attributed to the persistent labour shortages experienced across various industries.”
“Businesses are contending with dynamic conditions, including supply chain disruptions and ongoing uncertainties, impacting their hiring decisions,” he added. “The sustained elevation of job vacancies underscores the persistent challenges in matching available talent with the demands of the market,” he added. “While the unemployment rate remains low, it is imperative for policymakers and businesses to collaborate on strategies that address the nuanced challenges faced by industries experiencing labour shortages.”
Marco Lamantia, Executive Director of Square Australia, said that Aussie businesses are showing their ingenuity and resilient best by continuing to grow, despite the challenging macroeconomic environment.
“They’re being proactive and turning to technology to help them do more with less, but we’re not out of the woods yet,” Lamantia warned.
“This report transcends mere statistics; it serves as a rallying cry to acknowledge the shared challenges and opportunities confronting Australian households and small businesses,” Achterstraat said. “Australia faces a pivotal decision: Will we abandon our small business community to the mercy of the storm, or will we guide them to safer waters?”
