The newly released MYOB Business Monitor: SME Performance Indicator reveals that the small-business sector is falling behind the nation’s overall economic performance in terms of GDP. The SME Performance Score is -2.0 when compared with a maximum deviation from GDP that is benchmarked at +5/-5.
The SME Performance Indicator, created by Impact Economics and Policy, is a calculation of gross value added (GVA) for businesses with 1-19 employees across Australia. The deviation of GVA from real GDP provides the SME Performance Score of small-business performance relative to the overall economy. The lead indicator of SME economic performance draws on more than 17 million observations of 200,000 businesses, at an anonymised level.
Paul Robson, CEO of MYOB, said the performance indicator highlights the challenging conditions that small businesses have been facing for a number of years.
“The SME Performance Indicator tells us how the small-business sector is performing compared to the Australian economy, and the industries most impacted give us insight into why this might be down compared to GDP,” Robson said.
“The SME Performance Score, tracking the deviation of SME performance to GDP, is at -2.0 for May. This has been in negative since the end of last year, reflecting the economic environment SMEs are operating in,” he added. “Small businesses have less of a cashflow buffer than larger enterprises, and the cost of borrowing has had a significant impact on them, as has interest rates and cost of living pressures causing households to reduce their non-essential spending. Our findings suggest this has particularly affected the retail industry.”
Industry by industry analysis
Agriculture GVA was up 14 per cent for the 12 months to June 2023, boosted by record-high production across a range of crops and livestock. Healthcare SMEs spiked by around 40 per cent during the height of the COVID-19 pandemic as demand for health services surged.
B2B IT small businesses in the information, media and telecommunications industry have prospered, with GVA in these sectors rising by 20 per cent since the end of 2021, potentially driven by cost pressures that are driving for businesses to upgrade their IT systems to lift productivity.
On the downside, construction has been down six per cent over the past six months, and the rising cost of living has seen retail SMEs’ GVA drop seven per cent over the last two years.
“Ninety-seven per cent of Australia’s businesses are small businesses,” Robson said. “These 2.5 million firms employ 42 per cent of workers – the largest share of any business type – and represent nearly a third of total economic activity in Australia every year.”
“Small businesses are more sensitive to the business cycle and quicker to respond to changing economic circumstances than other business types,” he added. “Businesses like MYOB can also keep track of what hurdles these businesses are facing and ensure we’re providing support for this crucial sector.”
Dr Angela Jackson (pictured), Lead Economist at Impact Economics and Policy and Women in Economics National Chair, said that MYOB’s SME Performance Indicator will help decision makers in the private sector and government leverage data to gain valuable insights on the performance of the small-business sector and its role in the economy.
“The recent downturn in economic activity, and the flattening in April and May, suggest the small-business sector may not make a positive contribution to Australian GDP growth in the June quarter,” Dr Jackson said. “This is due to pressures on small business across key sectors.”
