SMEs are the lifeblood of the Australian Economy
Small and Medium Enterprises (SMEs) are the lifeblood of the economy.
Right across Australia businesses such as gyms, florists, hairdressers, real estate agents, butchers, mechanics, and restaurants create jobs and stimulate economic growth. In the past few years SMEs have shown resilience through COVID-19 and despite today’s challenging economic conditions, there is cautious optimism about the future.
SME Lending Report 2022
The ABA’s annual SME Lending Report was released in November 2022.
Click here to preview and download.
98% of businesses in Australia are SMEs
Of the 2.6 million businesses in Australia, the majority (98 %) are small and medium enterprises.
Micro businesses were the largest proportion of all Australian business, with 1.55 million (60 per cent) of businesses employing no staff. A further 955,000 businesses (37 per cent) employed 1-19 staff.
The number of micro businesses grew 10 per cent from 1.41 million in June 2021 to 1.55 million in June 2022. Small businesses grew 3 per cent from 931,791 in June 2021 to 955,861. This comes after an extraordinary period of growth during the 2021 financial year, jumping 15 per cent from 812,734 to 931,791.
The state with the largest number of SMEs is NSW, with 33% of all SMEs located in NSW. Overall, the distribution of SMEs by state follows the distribution of the population among states. The industry with the largest number of small businesses is construction (17%) followed by professional, scientific, and technical services (13%) then rental, hiring and real estate services (11%).
Recovery: the path from COVID
In April 2020 as many as 73% of SMEs reported a decrease in revenue from the previous month. Some industries recovered quickly from this contraction while others were harder hit. SMEs in hospitality, tourism and accommodation suffered an extended period of revenue reduction with three quarters or more continually reporting a reduction in revenue each month for an entire year to March 2021.
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How SMEs are using money borrowed from banks
Almost a quarter of all financing used by SMEs in September was for buying equipment, pointing to optimism about the future. 13% were using finance to purchase and to expand their business.
ABA SME Lending Report 2022
Heading into 2023
Heading into 2023 we expect SMEs to grow progressively confident.
The sector will play an increasingly important role in the health of the Australian economy as it grows and creates employment opportunities for more and more Australians.
Consumer confidence remains weak, but consumer behaviour tells a different story with retail spending continuing to grow, despite increasing inflation.
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Download ReportSMEs in Australia
Of the 2.6 million businesses in Australia, the majority (98 per cent) are small businesses. Micro businesses were the largest proportion of all Australian business, with 1.55 million (60 per cent) of businesses employing no staff. A further 955,000 businesses (37 per cent) employed 1-19 staff.
The number of micro businesses grew 10 per cent from 1.41 million in June 2021 to 1.55 million in June 2022. Small businesses grew 3 per cent from 931,791 in June 2021 to 955,861. This comes after an extraordinary period of growth during the 2021 financial year, jumping 15 per cent from 812,734 to 931,791.
Download the ABA SME Lending Report 2022
Download ReportThe economic environment
2022 saw an increase in the cost of goods and services reflected in rising inflation combined with low unemployment.
In an effort to combat inflation and a return to a ‘normal’ monetary policy setting, we saw increasing interest rates. Yet retail spending has grown at a faster rate since the beginning of the pandemic than it has in any previous period, with inflation yet to have any constraining effect.
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Download reportSME finance
The appetite for finance remains subdued amongst small businesses, but is growing amongst medium businesses.
The total value of outstanding finance to small businesses returned to the longer-term average, with $142 billion in outstanding loans at August 2022. On the other hand, lending to medium businesses has increased by 16 per cent, from $281 billion in August 2019 to $326 billion in August 2022.
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Download reportFuture borrowing intentions
In the six months to August 2022, no more than 17 per cent of SMEs reported anticipating requiring additional finance in the following three months.
The low levels of finance seeking by SMEs is in keeping with findings from previous ABA SME lending reports. In August 2022 just 9 per cent of SMEs reported anticipating that they will require additional finance over the next 3-months. This is much lower than at any time in the preceding 6 months
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Download reportIssues experienced by SMEs
In the current market, labour shortages are faced by many businesses in advanced economies, including SMEs. When asked why it’s difficult to fill roles, the most common response by SMEs was not enough candidates applying.
Despite the concerns SMEs have in recruiting staff, this remains a lesser issue in comparison to inflation, increasing costs of fuel and energy, and supply chain issues. Small and medium business all reported an increase in operating expenses between January and June 2022.
Download the ABA SME Lending Report 2022
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