Action urged on small business growth decline

A new research brief by free-market think tank the Institute of Public Affairs details the extent of Australia’s small business crisis, suggesting an alarming decline in the rate of small business growth. 

According to the research, less than 1 per cent of small businesses with one to four employees in 2017 employed more than four workers in 2018, below the historical transition rate of 6 per cent.

"Small business growth is in freefall, rates of self-employment are in decline, while rates of incumbency are rising," research fellow Kurt Wallace said. 

Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell said she is deeply concerned by fresh data showing small business growth is in crisis, urging the government to do more to break down the barriers to business expansion.

“What concerns me greatly about this report’s findings is the sharp drop in the percentage of small businesses hiring additional staff," Ms Carnell said. 

She noted that a major issue is Australia’s "rigid industrial relations system". The research cites World Economic Forum surveys, which have consistently found Australia’s labour market regulation is the most problematic factor for doing business. 

“Part of that broad picture is ensuring small business owners can feel confident they can meet their obligations and avoid an unfair dismissal claim in the event they need to let a worker go". 

Ms Carnell said that her office has recommended a number of changes and additional checklists to the Small Business Fair Dismissal Code to reduce the risk of unfair dismissal claims and provide small business owners with the impetus they need to hire more staff.

“The government has announced a review into the industrial relations system. The Small Business Fair Dismissal Code should be number one on that agenda,” she said. 

The Institute of Public Affairs has addressed its research brief to all federal parliamentarians.