SUMMARY OF FINDINGS
SUMMARY OF FINDINGS
There were 2,011,770 actively trading businesses in Australia as at June 2007.
While growth in the number of businesses slowed slightly between 2003-04 and 2005-06, there was a significant increase in the growth rate of businesses in 2006-07. Overall, growth rates for the past four financial years were 2.2% during 2003-04; 1.5% during 2004-05; 1.3% during 2005-06; and 2.4% in 2006-07.
In comparison, GDP (in chain volume terms) over the corresponding periods grew by 4.0%, 2.8%, 3.0%, and 3.2%, respectively, while Australia's population grew by 1.1%, 1.2%,1.3% and 1.5% over the same periods.
The growth in the number of businesses during the financial year to June 2007 was mainly due to increasing entry rates coupled with slightly decreasing exit rates. The entry rate for new businesses during 2006-07 was 17.0%, up from the 16.2% entry rate recorded in 2005-06. The business exit rate during 2006-07 was 14.6%, down from 14.9% in 2005-06. This exit rate was the lowest rate recorded over the four year period to June 2007.
Of the 1,868,969 businesses operating in June 2003 (which is when this data series commenced), 58% were still operating in June 2007. Of the 777,106 businesses which exited, 37% exited during 2003-04, 28% during 2004-05, 20% during 2005-06 and the remaining 16% during 2006-07.
Of the 325,935 business entries during 2003-04, 49% were still operating in June 2007. Of the 167,434 which exited, 48% had exited during 2004-05, 33% during 2005-06 and the remaining 19% during 2006-07.
In combination, the above two points indicate that, over the short to medium term, business survival is related to the age of a business. That is, the longer a business survives, the greater its chances of continuing survival.
Survival rates are also heavily influenced by non-employing businesses, which have significantly lower survival rates than employing businesses but contribute the greatest proportion of both the stock of existing businesses and business entries (67% of businesses operating in June 2003 and 72% of business entries in 2003-04 were non-employers). For example, while 49% of all entries in 2003-04 were still operating in June 2007, 71% of new employing businesses were still operating compared to 40% of new non-employers.
At June 2007, the distribution of the Australian business population by industry was similar to the distribution recorded in June 2006. Property and business services had the greatest number of businesses with 507,508 (or 25% of the total), followed by Construction (16%), Retail trade and Agriculture, forestry and fishing (11% each).
During 2006-2007, Education (24%) and Communication services (23%) had the highest entry rates, followed by the Finance and Insurance (21%) and Construction (20%) industries.
Over the same period, exit rates were highest for Communication services (20%), followed by Education, Electricity, gas and water supply and Personal and other services, each recording 18% exit rates. The relatively high entry and exit rates associated with the Education and Communication services industries suggests these industries have experienced a significant amount of churn over 2006-2007. These industries also experienced relatively low survival rates from 2003-2007 (see below).
Only Electricity, gas and water supply (-4.3%) and Manufacturing (-0.2%) experienced net decreases in the total number of businesses from the previous year (June 2006). The number of Manufacturing businesses has decreased in every year since this data series commenced in 2003.
The survival rates at June 2007 for businesses operating since June 2003 were highest for Health and community services (71%) and Agriculture, forestry and fishing (65%). Over the period June 2003 - 2007, the survival rates attributed to these industries were consistently higher than compared with other industries.
Survival rates were lowest for businesses operating in Communication services (45%) and Education (49%). As noted, for the period June 2003 - 2007, the survival rates attributed to these industries were consistently lower than in other industries.
The survival rates for business entries during 2003-04 continued to be similar in terms of their industry breakdown to those for the stock of businesses at June 2003. The business entry survival rates were led by those businesses in Health and community services (59%) and the Agriculture, forestry and fishing industries (58%), both had survival rates well above the national rate of 49%.
MAIN STATE OF OPERATION
At June 2007, the proportion of businesses by State (as defined by the main State of operation) was broadly aligned with the proportion of Australia's population by State. The main difference was that the larger States (New South Wales, Victoria, and Queensland) had a slightly greater proportion of Australia's businesses than they did of Australia's population (for example, New South Wales had 34% of businesses and 33% of the population). Western Australia joined this group of States by recording a slightly higher proportion of Australia's businesses (10.2%) compared to its population (10.0%).
For smaller States, the proportion of the population continued to outweigh the proportion of businesses (for example, Tasmania had 1.9% of businesses and 2.3% of the population). The Northern Territory had the lowest populations in terms of both people and businesses (1.0% and 0.7% respectively). This may in part be explained by the classification of businesses to their main State of operation, where that State is less likely to be one of the smaller States.
In the year to June 2007, Western Australia (4.7%) and Queensland (3.7%) continued to have the highest net growth in the number of businesses, and also experienced the highest entry rates (19.3% and 19.0% respectively). New South Wales (1.2%) and the Australian Capital Territory (1.0%) continued to experience the lowest net growth in the number of businesses, while entry rates were lowest in Tasmania (14%). Exit rates were highest for the Australian Capital Territory (16%), and the Northern Territory (16%), closely followed by Queensland (15%).
Of those businesses operating in June 2003, the survival rates at June 2007 followed the trend from June 2006. That is, survival rates were highest in Tasmania and South Australia and lowest in the Northern Territory and the Australian Capital Territory. The survival rates for business entries during 2003-04 were highest for Tasmania and lowest for the Northern Territory.
At June 2007, 1,276,545 (or 64%) of businesses were classified to the Household sector (which includes most unincorporated businesses), while 599,114 (30%) were classified to the Non-financial corporations sector, and 136,111 or (7%) to the Financial corporations sector.
There was growth across all three institutional sectors to June 2007. The Non-financial corporations sector grew by 2.5% from June 2006 to June 2007, while the Household sector grew 2.1% and the Financial corporations sector 5.4% over the same period.
Entry rates fluctuated between sectors: 21% for the Financial corporations sector; 18% for the Households sector; and 14% for the Non-financial corporations sector. Each entry rate increased notably from the previous year, while exit rates remained relatively stable.
Continuing an overall trend, the survival to June 2007 of businesses that were operating in June 2003 was higher for businesses in the Non-financial corporations sector (66%) than for those in the Households (56%) and Financial corporations sectors (56%). Survival rates for Non-financial corporations which entered in 2003-04 were also higher than for the other sectors.
TYPE OF LEGAL ORGANISATION
At June 2007, there were 641,538 (32%) Companies in Australia, followed by 620,037 (31%) Sole proprietors, 385,801 (19%) Partnerships and 364,075 (18%) Trusts. There were also a relatively small number of businesses (<1%) operating in the Public sector.
Over the past four years, there has been consistent growth across most organisational categories, except for Partnerships which have experienced decline each year.
Out of all private sector businesses in the period June 2006-07, entry rates were highest for Sole proprietors (22%) and Trusts (19%), followed by Companies (14%) and Partnerships (12%). Conversely, exit rates were highest for Sole proprietors (20%) and were noticeably lower across the other private sector categories. Across the past four financial years, both entry and exit rates have been relatively stable for all private sector categories.
For both the stock of businesses and for business entries, survival rates have been consistently higher for Trusts and Companies, while they have been lower for Sole Proprietors and Partnerships.
EMPLOYMENT SIZE RANGES
At June 2007, there were 839,938 (42%) employing businesses and 1,171,832 (58%) non-employing businesses.
Most employing businesses, 755,758 (90%) employed less than 20 employees. This comprised 527,445 (70%) businesses with 1-4 employees and 228,313 (30%) businesses with 5-19 employees. There were also 78,304 (9%) businesses with 20-199 employees and 5,876 (<1%) businesses with 200 or more employees.
In the period June 2006-07, entry rates were notably higher for non-employing businesses (20%) and businesses employing 200 employees or more (10%) compared to equivalent rates from the previous year (18% and 9% respectively). In comparison, entry rates for businesses employing between 5-19 employees and 20-199 employees remained relatively stable. Most business entries (93%) continued to occur in the micro business population, which comprises non-employing businesses and businesses employing between 1-4 employees.
Exit rates over the same period were highest for non-employing businesses (18%) and businesses employing 1-4 employees (10%), while being lowest for businesses employing between 20-199 staff (7%).
The survival rates for businesses operating since June 2003 varied significantly between the employing (81%) and the non-employing (47%) populations. In addition, for employing businesses, survival rates were slightly higher for businesses employing between 5-19 employees (85%) and 20-199 employees (85%). Survival rates of business entries were distributed in a similar manner.
ANNUAL TURNOVER SIZE RANGES
At June 2007, there were 742,288 (37%) businesses with turnover from $50k to less than $200k. This was followed by 646,458 (32%) businesses with turnover from $200k to less than $2m, 501,467 (25%) businesses with turnover between zero and $50k, and 121,557 (6%) businesses with turnover above $2m per annum.
In the period June 2006-07, entry rates were highest for businesses with turnover between zero to less than $50k (21%).
The survival rates for businesses operating since June 2003 were generally higher for businesses with higher annual turnover, although businesses with turnover from $50k to less than $200k had the lowest survival rate at 53%. A similar survival rate pattern emerged for businesses that started operating in 2003-04, although businesses with turnover of $2m or more recorded only the second highest survival rate.