AUSTRALIAN BUSINESS STATISTICS 2024

Overall, there were 2,662,998 actively trading businesses in Australia as of 30 June 2024, according to the Australian Bureau of Statistics.

To put that into perspective, there's just shy of one Australian business for every 10 people in the country.

There was a 2.8% increase in the number of businesses operating at the end of FY 2023/24 compared to the start of the year, or 73,125 extra businesses. That rate of growth is slightly higher than it was in 2022/23 (+2.0%), but down on the 2021/22 when the growth in business numbers was twice as high (+5.6%).

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 (43%), followed by sole proprietors (30%), trusts (18%), then partnerships (8%).

The remainder (only 395) are public sector businesses.

According to Dr Pratiti Chatterjee, Senior Lecturer in Economics at the University of Western Australia, new businesses opening in large numbers is encouraging to see in the short term, but doesn't necessarily translate to longer-term growth.

“After three or five years, you probably see that a lot of these businesses have exited the economy due to the fact that they're not sufficiently productive or adding as much value as was expected,” she said.

“In terms of a very broad picture, smaller businesses are really having a tougher time.

“The hospitality sector in particular is seeing dwindling profit margins, coupled with the fact that households have tight budget constraints right now, which means room for discretionary spending is lower.”

The challenges facing many Australian businesses are reflected in the increasing number of companies entering external administration, rising by 39.2% between FY 2022/23 and FY 2023/24.

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. It grew by 2.0% (+8,949 businesses) in 2023-24.

Transport, Postal and Warehousing (+8.5%), Health Care and Social Assistance (+7.7%), and Financial and Insurance Services (+4.8%) were the sectors with the biggest growth last year in terms of the number of businesses operating.

Agriculture, Forestry and Fishing (-1.3%) and Retail Trade (-1.4%) were the only industries to record a decline in total number of businesses operating in 2023/24.

The survival rate of new businesses varies significantly between industries.

On one end of the scale, just under 62.6% of agriculture, forestry and fishing businesses survived beyond three years of operating (among businesses started in the 2020/21 financial year).

At the other end, only 38.8% of transport, postal and warehousing businesses survived over the same time frame.

The overall survival rate across all industries was 50.1% – a coin toss.

Looking ahead, Dr Chatterjee said two of Australia's largest sectors – mining and third-level – education could be vulnerable over the coming year.

In the case of mining, China’s slowing economic growth is likely to continue impacting iron ore exports. For universities, foreign student caps will present a challenge.

According to Yanir Yakutiel, CEO of business lender, Lumi, construction is another area of concern.

"Continued RBA rate increases have put further pressure on house prices and development, with lead contractors on fixed contracts particularly exposed," he said.

But beyond these areas, there is some hope for Australian businesses that things may improve in 2025.

“When we look at forecasts by the RBA or various policy institutions, we're forecasting that we're almost at the bottom or at the bottom," Dr Chatterjee said.

"So going forward by early 2025, we do see the economy picking up, assuming that there are no other further disturbances or nothing major going on with the economy.”

The Australian Capital Territory and Western Australia enjoyed the joint largest percentage growth in businesses operating in 2023/24.

However, New South Wales added the most new businesses in total (+25,569) and remains the state with the highest total number of businesses (896,485). That's despite NSW being the state with the highest net migration of business out of the state.

Queensland continues to be the preferred destination for businesses moving interstate, adding 1,380 new from other states last financial year.

Looking at the number of businesses per head of population, New South Wales has the highest at 0.105 businesses per person. Tasmania has the lowest at 0.064.

The Northern Territory has the lowest business survival rate. Less than half (49%) of business there lasted beyond three years, with Victorian businesses faring on slightly better (49.1%). Tasmanian businesses had the best survival rate — 54.6% of businesses there lasted beyond three years of opening.

The business sector in Australia is dominated by SMEs (small and medium enterprises). In fact, 97.2% of all business in Australia (just under 2.6 million) are small businesses (0-19 employees) and a further 2.6% are medium businesses (68,214), employing 20-199 employees.

The remaining 0.2% of businesses in Australia have more than 200 employees.

Among the population of small businesses, 64.3% do not have any employees, 26.8% employ between 1-4 people and 9.2% employ between 5-19 people.

But overall, large businesses employ more people (4.376 million) than any other type of business.

Mining remains comfortably Australia's largest industry by earnings ($274.7 billion in 2022-23), growing by more than 23% compared to the previous year.

This sector was aided by shortages in energy commodities in Europe and strong demand in Asian markets through 2022, according to the ABS.

Earnings in construction, manufacturing and retail trade also increased, albeit by much more modest amounts. Of the highest-earning industries rental, hiring and real estate services was the only one to experience a drop earnings, -0.7% compared to the previous year.

“Operating profit results were mixed at an industry level as many businesses faced the challenge of higher input costs in 2022-23," said Robert Ewing, ABS head of business statistics.

“Businesses experienced a mix of conditions including higher input costs, increased demand due to higher migration and a rise in non-discretionary spending due to the end of COVID-19 restrictions."

According to the ABS, industries benefitting from these factors, included the retail industry, wholesale industry, transport and accommodation and food services.

On the other hand, the rental, hiring and real estate services industry was negatively impacted by the Reserve Bank of Australia’s actions to reduce inflation by raising the cash rate

What about the least profitable industries?

Exploration and other mining support services (-6.8%) and water transport were the only two sectors recording a negative profit margin, while several other sectors operated under wafer-thin positive margins.

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 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 continues to soar in 2024. Overall, outstanding finance to businesses was up almost 9% in July 2024, compared to the previous year. Lending to medium-sized businesses has seen the biggest growth in that period (+15.4%).

Business cashflow remains the main driver behind a lot of funding requirements, according to Money.com.au's business lending expert, Phil Collard.

"As an example, building, trade and construction accounts for a large portion of SMEs in Australia and these businesses are generally required to make upfront payments for materials and supplies on projects with income not being realised until certain progress/milestones during the build process," he said.

There's also been a spike in the number of businesses borrowing to pay off ATO tax debt.

"We are now seeing the tax office make good on their promise to recoup accumulated tax debts by SMEs following a reprieve during the pandemic. Business owners are now considering funding solutions in order to satisfy outstanding tax obligations."

New lending has been predominantly at variable rates – 86.9% of outstanding business finance as at June 2024.

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 been relatively flat in the last 12 months (to July 2024), in line with a stable cash rate, but businesses are still paying significantly higher rates than they were a couple of years ago.

The greater perceived risk of lending to smaller businesses is reflected in the high rates paid versus larger businesses.

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.

Phil said despite soft conditions in some sectors of the economy, there's been a trend towards businesses borrowing to fund growth.

"This is still being approached with caution, but SMEs are increasingly looking to scale up their business by leveraging loans to help fuel growth," he said.

"The right loan facility can be a very powerful tool to accelerate growth so be sure to have your plans clearly mapped out, including expected ROI."

This trend is reflected in the high average loan amounts for expansion by acquiring an existing business, as well as machinery/equipment purchases.

Business credit card spending has surged since the end of the COVID-19 pandemic.

In fact, the monthly transaction value hit another all-time high in June 2024, at $8.64 billion.

There are around 842,800 commercial credit cards accounts in Australia, meaning the average account has a monthly balance of $15,166.

You can read more on credit card usage in Australia in your credit card debt guide.