When it comes to small business creation, Australia has a hit a bit of a lag.  Between 2003 and 2014 the Australian small business entry rate declined by 40%, accounting for one of the largest small business decreases in the world.

For starters, when talking about the small business drop, The businesses tracked consisted of small business startups with 20 employees or less.On a podcast discussing the issue, Matthew Lesh from the Institute of Public Affairs and  Luke Grant spoke about a few things that could be causing the steep decline:

  • Aging population.  The key small business starter demographic (e.g. those between the ages of 25 and 49) have decreased in Australia versus previous generations
  • Barriers of entry:  Government red tape has made it hard for some businesses to start basic companies.  According to a conversation during the podcast, currently $176 billion in lost economic activity is lost on an annual basis due to red tape.
  • Taxes:  Australia’s current corporate tax rate sits at 30% which is the highest in the development world.  In addition, the small business tax rate is not far with sitting at 25%

These three elements seem to be aiding in the decrease of small businesses and as such has resulted in billions of potential loss revenue.  While a call for more small businesses is needed (it was mentioned that 2 out of 3 young Australians want to start a business at some point), this can only be done with more support.