Conditions for Australian businesses have been challenging for the past few years. To put it mildly.
The 2022/23 financial year was particularly tough, with a significant drop in the number of new businesses opening and an increase in business closures, compared to FY 2021/22.
For a deeper insight into the state of play across Australian businesses, we've compiled an extensive list of business statistics and facts.
Overall, there were 2,589,873 actively trading businesses in Australia as of 30 June 2023.
To put that into perspective, there's just shy of one Australian business for every 10 people in the country.
In FY 2022/23 there was a 0.8% increase in the number of businesses operating compared to the previous year, or 19,973 extra businesses. That rate of growth has fallen from the year before, when it was +7%, or 167,646 extra businesses.
Here's how the number of businesses has changed over the years...
And here's the total broken down by type of business.
The company structure dominates (42%), followed by sole proprietors (30%), trusts (19%), then partnerships (9%).
The remainder (only 393) are public sector businesses.
The high level of consumer spending that made strong business number growth possible in 2021/22 dried up in 2023/23, making trading conditions challenging for Australian businesses.
“In 2023, most of the effect of the pent-up demand post COVID waned," Dr Pratiti Chatterjee of the UNSW Business School told Money.com.au.
"And at the same time households saw their disposable real income decrease because of inflation.
“From a business point of view, this translated to weaker demand for products across the board at the same time as wage costs were increasing,” Dr Chatterjee said.
There had already been a spike in the number of companies entering external administration.
The latest figure for the June 2022 quarter (1,567) was a 23% increase on the same period in 2021.
Of course, some sectors of the economy can weather turbulence better than others.
Let's look at the current industry-by-industry business number breakdown.
Construction remains Australia's largest industry by number of businesses operating.
Although it contracted by 0.1% (-392 businesses) in 2022-23.
Health care and social assistance (+6.1%), financial and insurance services (+2.7%), and transport, postal and warehousing (+2.4%) were the sectors with the biggest growth last year in terms of the number of businesses operating.
Administrative and support services (-1.6%) and retail trade (-1.4%) saw the largest relative decline.
And here are largest industries by number of employees.
The traditional industries dominate here too, with healthcare, social assistance, and retail combined making up almost 24% of Australia's workforce.
The survival rate of new businesses varies a lot between industries.
On one end of the scale, just under 64% of agriculture, forestry and fishing businesses survived beyond three years of operating (among businesses started in the 2018/19 financial year).
At the other end, only 35.6% of transport, postal and warehousing businesses survived over the same time frame.
The overall survival rate across all industries was 50.8%.
According to Dr Chatterjee, the continuing recovery from the pandemic and international factors have been be key to determining which industries survive and thrive in 2023.
“Travel and education exports have once again become important for the Australian economy”, she said.
But there are challenges for some sectors, like building and construction, according to Yanir Yakutiel, CEO of business lender, Lumi.
"Continued RBA rate increases have put further pressure on house prices and development, with lead contractors on fixed contracts particularly exposed," he said.
But Yakutiel echoed the optimism for the tourism and education sectors, as well as the related hospitality and services industries.
"They still have much further to bounce back from pre-pandemic levels as tourists and overseas students return to Australia and normal consumption levels resume", he said.
The Australian Capital Territory had the biggest percentage growth in businesses operating in 2022-23.
Its 3.5% growth rate was more than three times that of New South Wales (5.5%), although NSW remains the state with the highest total number of businesses (870,916).
Victoria was the only state to record a decline in the number of businesses operating, with 7,607 fewer businesses operating compared to the previous year (-1%).
Victoria also had the highest number of businesses moving to a different state (-1,345), while Queensland had the highest inward business migration (+1,782).
Looking at the number of businesses per head of population, New South Wales has the highest at 0.11 businesses per person. Tasmania has the lowest at 0.06.
The Northern Territory has the lowest business survival rate. Less than half (48.2%) of business there lasted beyond three years. Tasmanian businesses had the best survival rate — 54.7% of businesses there lasted beyond three years.
|State/territory||Businesses opened||Businesses closed||Net migration in/out of state|
New South Wales
Australian Capital Territory
The business sector in Australia is dominated by SMEs (small and medium enterprises).
In fact, 97.3% of all business in Australia (or around 2.5 million) are small businesses (0-19 employees) and a further 2.5% are medium businesses (64,559), employing 20-199 employees.
Among the population of small businesses, 62.9% do not have any employees, 27.9% employ between 1-4 people and 9.2% employ between 5-19 people.
The remaining 0.2% of businesses in Australia have more than 200 employees.
But overall, large businesses employ more people (4.202 million) than any other type of business.
Mining was again comfortably Australia's largest industry by earnings ($220.32 billion in 2021-22), growing by more than 32% compared to the previous year.
Each of the other highest-earning industries grew their income in 2021-22, with the exception of construction which declined by more than $5 billion (-9.3%).
|Business sector||Profit margin|
Property operators and real estate services
Metal ore mining
Professional, scientific and technical services (except computer system design and related services)
Oil and gas extraction
Creative and performing arts activities
Medical and other health care services (private)
Rental and hiring services (except real estate)
Building cleaning, pest control and other support services
Fishing, hunting and trapping
“Profitability was largely driven by higher demand for goods and services, which saw businesses pass higher costs onto consumers,” said Robert Ewing, ABS head of business indicators.
“After slower profit growth across the earlier COVID-19 pandemic affected years almost all industries recorded higher operating profits in 2021-22. This is despite many businesses seeing increased input costs and a reduction in government COVID-19 subsidies.”
What about the least profitable industries?
Air and space transport, motion picture and sound recording, and water transport were the only sectors recording negative profit margins in 2021-22.
Private hospitals as a sector has one of the lowest overall profit margins, as well as being the sector with the highest proportions of loss-making businesses.
|Business sector||Profit margin|
Air and space transport
Motion picture and sound recording activities
Exploration and other mining support servicea
Heavy and civil engineering construction
Grocery, liquor and tobacco product wholesaling
Printing (including the reproduction of recorded media)
|Industry||Earnings ($billion)*||Profit margin||Businesses made a profit/broke even||Businesses made a loss|
Agriculture, forestry and fishing
Finance and insurance services
Electricity, gas, water and waste services
Accommodation and food services
Transport, postal and warehousing
Information media and telecommunications
Rental, hiring and real estate services
Professional, scientific and technical services
Administrative and support services
Public administration and safety (private)
Education and training (private)
Health care and social assistance (private)
Arts and recreation services
Of course, profitability can vary massively between different businesses in the same industry.
For example, how established a business is can be an indicator of profitability.
A Money.com.au study on business financial security found that twice as many established businesses (20%) make significant profits of over 30%, compared to young businesses (10%).
Location in Australia can also be a factor.
Just over a quarter (29%) of ACT businesses make no profit, compared with businesses in Western Australia (13%), New South Wales (13%) and Victoria (10%) according to the same Money.com.au study.
Business lending in Australia increased significantly in 2022 and continued to grow in the early part of 2023. Overall, outstanding finance to businesses was up almost 9% in June 2023, compared to the previous year.
New lending has been predominantly at variable rates. Just over 86% of outstanding business finance as at June 2023 was on a variable rate, compared to just under 85% a year previously.
The proportion of business finance that's on a variable rate has been creeping up steadily since July 2019 (the earliest records published by the RBA) when it was just over 78%.
Interest rates on business lending have risen steeply since May 2022 when the Reserve Bank of Australia began lifting the official cash rate.
The rate of increase has tapered somewhat, but is still heading north as the lagging impact of tighter central bank monetary policy is still being felt.
Business credit card spending also continues to surge in 2023.
In fact, the monthly transaction value hit another all-time high in May 2023, at $8.53 billion.
"Much of the increased spend is travel related as this roars back to life and air fares increase in price," Money.com.au's credit cards expert Brad Kelly said.
Indeed, total overseas spending on commercial credit and charge cards has comfortably surpassed pre-COVID levels, to a monthly high of $495.2 million in May 2023. That includes spending by small businesses as well as spending on corporate credit cards. That was a 31% increase from the same time in 2022.
'Device present' overseas purchases (those make physically at an overseas location) made up a large proportion of the increase, although that portion of overseas spending is still down significantly compared to pre-pandemic levels.
Kelly believes the tighter economic conditions Australia is experiencing will encourage more businesses to move away from credit cards and adopt charge cards.
These are cards with no credit limit, but which require the balance to be cleared each statement period.
"Charge cards will be very much in vogue in 2023 because they are an expense line not a liability on the balance sheet," Kelly explained.
"Typically banks sell credit cards with limits, and limits soak up credit. For a business, credit ties up working capital, whereas a charge card does not do that.
"This is something that businesses don’t realise," he said.
He added that the rising cost of credit will likely also make charge cards — which do not incur interest charges — more popular among businesses.
This is already being reflected in the growing market share of Australia's major charge card providers, American Express and Diners Club.
You can read more on credit card usage in Australia in your credit card debt guide.
Now let's look specifically at lending to small businesses.
According to Money.com.au data, the average small business loan amount requested is $94,845.
Financing a business vehicle is the most common loan purpose (41%), followed by requests for businesses looking to access finance for day-to-day capital (29%). Loans for business equipment make up 10% of all requests received.
According to research from business lender, Prospa, one in four small business owners intend to borrow for their next phase of growth.
And despite the economic challenges facing Australia, small businesses overall appear optimistic about their growth prospects in 2023, with 81% anticipating growth in the next 12 months.
Which businesses look best-placed to grow?
"Industries such as health and hair and beauty continue to perform well, as do businesses that have a mix of customers coming to them via an online store," Prospa's Head of Enterprise & Platforms, Joseph Lim, said.
"We’ve also seen some slight geographical trends, with manufacturing in Queensland and wholesale retail in the Northern Territory and South Australia growing quickly," Lim added.