Micro businesses: The micro but mighty powerhouse of Australia’s economy

- July 24, 2023 2 MIN READ

According to a new report by the McKell Institute, almost nine in ten Australian businesses are micro businesses.

The report, commissioned on behalf of NRMA Insurance, has revealed that over the past four years, micro businesses have emerged as the fastest-growing segment in the country’s business landscape.

Microbusinesses, characterised by a small number of employees, turnover, and assets, make up 89 per cent of all businesses in Australia. The sector has experienced a remarkable 14 per cent growth, expanding from 2 million to an impressive 2.28 million businesses during the study period.

One of the most compelling findings from the report is the undeniable impact microbusinesses have on employment and profits. In the financial year 2020-21, microbusinesses surpassed small businesses in their contribution to employment by a striking 39.8 per cent and their pre-tax earnings by an astonishing 178.6 per cent. With a workforce of 2.9 million people, these micro ventures have generated a staggering $265 billion in value-added, significantly exceeding the 2.1 million people and $174 billion generated by small businesses.

The report also revealed women’s vital role in the micro business sector. Despite facing unique challenges, including gender discrimination in the workforce, limited access to resources, and a lack of professional support teams, women have been leading the charge in establishing and running micro businesses. Latest figures show that women own 35 per cent of Australian businesses, and many have embraced microbusinesses to secure income and balance family responsibilities.

NRMA Insurance Chief Executive Officer Julie Batch emphasised the value of micro businesses to the nation, stating, “Micro businesses start with a passionate owner, a fantastic idea, and thrive on community support. There are incredible opportunities for this sector, not only in economic contribution to the nation but also in the positive impacts many of these businesses have within their local communities.”

However, despite their remarkable growth and impact, the report suggests we can’t ignore the challenges of micro businesses. The report highlights limited access to finance and specialist expertise in areas such as finance and marketing, making it difficult for these small enterprises to navigate the complexities of the business landscape effectively.

Moreover, the report also brings to light the vulnerabilities micro businesses face, such as cyber security risks and the lack of resilience against natural disasters. With 41 per cent of microbusinesses relying heavily on online sales, cyber attack is an increasing threat. Climate change is also amplifying the frequency and intensity of extreme weather events, posing significant challenges for many micro business owners, who often lack the financial capacity to recover from disaster-related losses.

The ‘Micro but Mighty’ Microbusiness Report calls for greater recognition and support of microbusinesses, including establishing a formal definition for the sector, a one-stop-shop resource for microbusiness support, and targeted government support to address their unique challenges.

The report suggests that as the microbusiness sector continues to shape the Australian economy, there is no denying that empowering these small yet mighty enterprises is essential for fostering economic growth and creating a resilient business landscape for the future.

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