15th October, 2024
The latest MYOB Business Monitor: SME Performance Indicator shows small businesses have been disproportionately impacted by current economic conditions, resulting in a SME Performance Score of -2.3 for August 2024 (where maximum deviation from GDP is benchmarked at +5/-5), down from –2.0 since the last data capture in May.
The latest Performance Indicator, authored by Impact Economics and Policy, draws on millions of anonymised and aggregated data points from Australian small businesses (with 1-19 employees), calculating gross value added (GVA) and calibrates it against the Australian GDP.
The latest findings reveal inflation and interest rates and the resulting impacts on discretionary spending has further softened outputs for SMEs.
MYOB CEO Paul Robson says the data shows Australia’s 2.5+ million SME community is experiencing inflationary pressures at a different pace to bigger businesses, and this must be considered when policy planning.
“The SME community was resilient in the face of the pandemic, and now the concern is that the side effects of inflationary pressures will linger within the community,” he says.
“As the majority employer of Australians, it is vital we provide the right level of support to SMEs to ensure their longevity and growth.
“Small businesses are feeling cost of living pressures just as consumers are across the board. Any assistance the government can provide to help relieve these pressures, as well as to lift their productivity, will be crucial to the economic health of the nation.”
Dr Angela Jackson, Lead Economist at Impact Economics and Policy and Women in Economics National Chair says despite another soft quarter, she expects to see some improvement in the near future.
“The small business sector continued to weaken in the last quarter both in absolute terms and relative to the rest of the economy,” she says.
“This confirms we are likely to see another weak quarter of economic growth when the ABS releases its next quarterly National Accounts data in December.
“Of note, the impact of high interest rates and high inflation are being felt outside sectors directly impacted by the slowdown in consumer spending.
“We expect to see some improvement next quarter, as the cost-of-living pressures ease and consumers increase spending.”
As inflation causes Australians to reconsider discretionary spending, this edition of the SME Performance Indicator provides an in-depth view of the effects on the retail sector, an industry which has been impacted most heavily by the current economic conditions. The most recent Indicator observation shows retail GVA has reduced 15% since the end of 2021 and is 5% lower than the end of 2023.
Agriculture remains buoyant, where ongoing plentiful crop and livestock production will continue to ensure this sector tracks well above forecast GDP. Equally, the health industry is demonstrating strong resilience in the face of discretionary spending cutbacks, as Australia’s population booms (growing 5.2% between December 2021 and March 2024).
Western Australia has outpaced other states, with small businesses benefitting from upward trends including population growth, consumer spending and the increased price of commodities.
Since 2022 household consumption has more than doubled in Western Australia when compared to the rest of the nation, up 6% compared to an average of 2.3% for the other major states. However as commodity prices retreat, a future narrowing of the wedge between the indicators for Western Australia and the other major states is expected.
Overall, the latest SME Performance Indicator shows small businesses are in a strong position to weather the storm, if they are given the support they need.
“Small businesses are not only resilient and agile, they are everlasting,” Paul says. “We have a strong history of entrepreneurship in Australia and they will continue to persevere through these tough times. But they need our collective support, in the form of patronage from those who can and in the form of economic relief from the Governments that set the context in which they operate.
“Together we can ensure that as Australia’s economy returns to growth, with SMEs leading the way from a position of strength.”
The MYOB SME Performance Indicator shows the overall level of economic activity for Australia’s small business sector as a monthly series. The SME Performance Indicator, authored by Impact Economics and Policy, is determined by the calculation of gross value added (GVA) for businesses with 1-19 employees, aggregated for the whole Australian small business sector. GVA is a measure of the value of goods and services produced in an area, industry or sector of an economy. The deviation of GVA from real GDP provides the SME Performance Score of small business health1 relative to the Australian economy.
The lead indicator of SME economic performance draws on more than 17 million observations of 200,000 businesses, at an anonymised level, and provides the most comprehensive and up to date data on the performance of Australian small businesses.
Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.