Small business goes ‘whoosh’: how middle Australia drove Covid recovery

It’s not politicians, and it’s not the big corporates driving the post-pandemic recovery … it’s plumbers, carpenters, electricians and builders. Here’s how middle Australia took its future into its own hands.

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It is a data set that doesn’t ­receive the attention it ­deserves. Business Count is prepared by the Australian Bureau of ­Statistics and is ­released annually in February.

It counts the number of businesses operating at the end of the previous ­financial year. Data for the Covid-ravaged 2021 financial year was ­released last week. It tells a powerful story of resilience and of aspiration.

Unlike estimates of the labour market, Business Count isn’t a survey. Nothing here is estimated. It is a ­census not of people but of businesses. Every year it counts all Australian Business Numbers (ABNs), or business entities, that ultimately feed into the ATO.

The published data relates to businesses by location, by industry and by employment category. The story of the pandemic’s impact on Australian business is revealed in this relatively unassuming yet factual, national, compelling, I say riveting, data set. Here are my observations on what this data set says.

Small business goes “whoosh”

Small business owners are responsible for the nation’s whooshed-up, labour-soaked-up, entrepreneurial Covid-19 recovery. Picture: AAP/File
Small business owners are responsible for the nation’s whooshed-up, labour-soaked-up, entrepreneurial Covid-19 recovery. Picture: AAP/File

At the end last financial year (June 2021) there were 2.4 million business entities operating in Australia, up 88,000 over the previous 12 months. This compares with net growth of just 45,000 for the previous financial year.

The last three months of the 2020 financial year were marred by a ­national lockdown (April-June); GDP contracted by 7 per cent in the last quarter. Unemployment peaked at just under 8 per cent in July 2020.

The initial response to the pandemic resulted in significant labour shedding. Small business owners responded by laying off workers; these micro-businesses then tumbled into the sole-trader category.

These data facts relating to the 2020 financial year suggest that many small business operators were, by year’s end, operating hand-to-mouth in a kind of pilot-light mode, just waiting for conditions to improve before bursting back into life. This is not unlike the audible whoosh effect when a pilot light ignites the main burner.

This is evidenced in the business pyramid that compares 2020 with the 2021 financial year.

In 2020, the number of sole traders jumped 56,000 as small and micro-businesses contracted. In 2021 these sole traders took on staff, moved up the employment hierarchy, and defibrillated the micro-business sector (employing one to four workers) into life (up 112,000). And, in the process, and with borders remaining closed for the whole of this financial year, much of the available labour was soaked up.

So, in which sectors, and where, did this whooshed-up, labour-soaked-up, entrepreneurial hyped-up recovery occur?

Property and the (cities’) periphery to the rescue

Sydney's north is an incubator for small business. Picture: Supplied
Sydney’s north is an incubator for small business. Picture: Supplied

Most net new businesses (or ABNs) created across the 2021 financial year materialised in Construction (up 16,000 or 4 per cent) followed by Professional Services (up 14,000) and Health Care (up 11,000).

The sector that continued to contract last year was Transport (includes Uber drivers, aviation, public transport workers), which lost almost 6000 businesses in net terms.

Most net new businesses formed during the 2021 financial year clustered either in the CBD and inner city or in growth areas on the city fringe (or periphery).

If there is an effective “business ­incubator” on the Australian continent, it is surely Sydney (North) – Millers Point, which includes the Sydney CBD (quay end) and The Rocks.

This 3.2sq km patch of Australia contained 36,235 business entities on June 30 last year, up 877 over the previous 12 months. No other part of the Australian continent comes close to this place’s ability to generate net new businesses.

Second ranking (in national terms) on this measure is Sydney’s inner city Surry Hills, up 491 net new businesses, while third spot goes to Melbourne’s Rockbank-Mount Cottrell in the city’s burgeoning west (up 456 businesses).

In Queensland, the hotspot for net new business creation is Newstead-Bowen Hills (up 244), while in South Australia the state’s entrepreneurial hotspot is the Adelaide CBD (up 275). In Western Australia, most net new business formation clusters in Perth’s northern (inland) suburb of Madeley (up 150).

Most net new businesses in Tasmania cluster near Hobart’s airport at Cambridge (up 80) while in the Top End this honour goes to Darwin’s Charles Sturt University and surrounds (up 34). In Canberra, most net new businesses cluster in the Gungahlin suburb of Moncrieff (up 97).

Insights into the mind and mood of middle Australia

Plumbers, ­electricians, carpenters and builders are starting their own businesses and helping to drive the recovery from the pandemic. Picture: File
Plumbers, ­electricians, carpenters and builders are starting their own businesses and helping to drive the recovery from the pandemic. Picture: File

One of the most popular “local initiatives” to stimulate business growth over the last decade has been the ­establishment of business incubators, or “start-up hubs” if you like.

And while I am sure many of these initiatives do in fact generate net new businesses they are equalled if not eclipsed, in number at least, by (mostly property) businesses created on the city’s edge.

The evidence from the Business Count data set is that the property ­industry is an important enabler of business formation in Australia.

And not necessarily in the knowledge-worker’s preferred inner-city domain but on the city’s Middle-­Australia periphery, where plumbers, ­electricians, carpenters, builders and more every year set about starting up their own businesses. Indeed, there are a number of broader observations that can be made about Australia and Australians from this “census of ­Aussie business”.
Australia’s entrepreneurial energy

The pandemic has not diminished the entrepreneurial spirit of the Australian people.

Net new business formation last ­financial year (of 88,000) was the largest increase in any single year since this data set was first published in 2003-04, and probably longer!

I suspect that many small business entrepreneurs used the pandemic as an opportunity to start-up, to scale up (from pilot mode), to come out of ­corporate life and to create something they have long thought about.

Property at the centre of Australian values

The construction sector continues to boom. Picture: File
The construction sector continues to boom. Picture: File

The Australian population more or less remained static across the 2021 ­financial year, with natural increase barely covering net migration losses.

The last time Australia actually lost population from one year to the next was after WWII when US troops returned home. And yet in this demographically “barren” year there was record business growth (by number).

And, more importantly, most of the net new businesses created in this year was in construction! The general trope is that construction is dependent upon immigration.

However, I suspect that many property businesses created in this year serviced pipeline residential projects, home renovations and home improvement.

Property, home ownership, home improvement and being your own boss are central tenets of the Australian way of life; each are embodied in the construction sector.

Even in these most calamitous of times, it seems that core Australian values and priorities shine through

Superannuation and Financial Services Minister Jane Hume says Australians “should be proud” of the country’s

And then we come to perhaps the powerful observation that, to me at least, litters the Business Count data set. And that is irrepressible optimism of the Australian people. Not so much in the upper-echelon corporate Australia but within Middle Australia, the operators of small businesses, and among our burgeoning Tradie Nation, who every weekday drive Ford Rangers to building sites in Melbourne’s Rockbank, Perth’s Madeley, Canberra’s Moncrieff and more.

Out of the depths of a technical ­recession in the June quarter of 2020 rises this lot, this broad swathe of Middle Australia, has taken on apprentices and in so doing moved their ABN from sole trader to the micro-business category. All this is done in the pursuit of prosperity via a business of their own.

Now that is the stuff of entrepreneurship. That is the stuff that is driving us forward even in these most challenging of times. Just imagine what we will do with a clear year, with access to skills, to labour, with a market primed and ready to rebuild their Covid-ravaged lifestyles.

I see last week’s Business Count data set as evidence that small business Australia is determined to survive the pandemic and to thrive in a post-Covid world.

Bernard Salt AM is executive director of The Demographics Group; research and graphics by Hari Hara Priya Kannan