Entrepreneurship2.1 Business Demography
2.1.1 Businesses in operation by industry
The number of businesses operating in a given industry gives an indication of the market structure and level of competition, which in turn determines how businesses might innovate. At the end of June 2021, there were 2,398,926 actively trading businesses in Australia. This represents an increase of 3.8 per cent from 2,310,937 businesses at the end of June 2020. All industries saw positive growth including Other services (7.4 per cent) and Health care and social assistance (7.2 per cent), with the exception of Transport, postal and warehousing (2.8 per cent decrease) and Public administration and safety (1.4 per cent decrease). As at 30 June 2021, the highest number of businesses were in Construction (410,839 businesses or 17.1 per cent of total) and in Professional, scientific and technical services (316,462 businesses or 13.2 per cent of total). (Note: The totals shown in the chart exclude businesses where the industry is Currently Unknown, resulting in a small difference from the aggregate totals).[44]
2.1.2 Business entries and exits by industry
Business entries and exits reflect business dynamism, and may be used as proxy indicators for the prevailing conditions for entrepreneurial activity. During 2020–21, the number of new Australian business entries was 364,927 — a sharp increase of 8.6 per cent from 2019–20 (335,931 businesses). The number of business exits in 2020–21 was 276,938 — a decrease of 4.5 per cent from 2019–20 (289,914 businesses). Emergency measures such as subsidies for wages, business cashflows and business insolvency laws appear to have reduced the rate of business failures during the onset of COVID-19. Not surprisingly, business entries have increased over the same period.[45] Industries with the highest number of entries in 2020–21 include Construction (67,242 businesses), Professional, Scientific and Technical Services (50,032 businesses), and Transport, Postal and Warehousing (37,188 businesses). Almost all industries recorded positive growth in business entries over the period, with the exception of Transport, postal and warehousing and Public administration and safety (Note: The totals shown in the chart exclude businesses where the industry is Currently Unknown, resulting in a small difference from the aggregate totals).[46]
2.1.3 Survival of business entries by industry
The aggregate rate of business survival, while determined by many factors, provides a simple summary measure of the likelihood of entrepreneurial success. Of the 342,462 businesses that entered during 2017–18, some 76.6 per cent (262,338 businesses) survived to June 2019, and 60.4 per cent (206,908 businesses) were still operating two years later in June 2020. The proportion of this cohort that survived the three years to June 2021 was 52.1 per cent (178,338 businesses). Within this cohort, businesses in the Health care and social assistance industry had the highest survival rate (65.9 per cent) at the end of 2020–21, closely followed by those in Agriculture, forestry and fishing (65.3 per cent), whilst businesses in the Transport, postal and warehousing industry had the lowest survival rate (38.5 per cent). (Note: The totals shown in the chart exclude businesses where the industry is Currently Unknown, resulting in a small difference from the aggregate totals).[47]
2.1.4 Churn rate by industry
The industry churn rate is the sum of the birth and death rates of businesses in an industry in a financial year. This measure is a proxy for the simultaneous creation of new businesses and the destruction of established ones. New businesses are essential to driving innovation and delivering it to market.[48] The annual churn rate across All industries rose from 25.8 per cent in 2014–15 to 27.8 per cent in 2020–21. While churn rates vary across industries, large changes over time are rare. One industry that has seen significant change is Transport, postal and warehousing, which rose from 28.2 per cent in 2013–14 to 50.5 per cent in 2017–18 before decreasing back down to 40 per cent in 2020–21.[49] Contributing to the rise were changes introduced in the Victorian taxi market in 2016, which dramatically reduced the cost of purchasing a taxi or hire car license.[50] Also, the strong residential property market has encouraged new businesses to enter the removalists industry.[51]
Footnotes
[44] ABS, Counts of Australian Businesses, including Entries and Exits, Cat. No. 8165.0
[45] Productivity Commission (2021) PC Productivity Insights: Recent developments
[46] ABS, Counts of Australian Businesses, including Entries and Exits, Cat. No. 8165.0
[47] ABS, Counts of Australian Businesses, including Entries and Exits, Cat. No. 8165.0
[48] Economics Innovation Group, Dynamism in Retreat: Consequences for Regions, Markets and Workers, February 2017
[49] ABS, Counts of Australian Businesses, including Entries and Exits, Cat. No. 8165.0
[50] IBISWorld, Taxi and Limousine Transport in Australia, Industry Performance
[51] IBISWorld, Removalists in Australia, Industry Performance