Australian small businesses achieved the lowest growth rate in the Asia-Pacific in 2021, CPA Australia’s Asia-Pacific Small Business Survey revealed.
CPA said that the findings highlight the need for governments to do more to support Australia’s digital future.
“As part of their federal election promises, CPA Australia is urging the major political parties to commit to more ambitious programmes to accelerate small business digital transformation,” CPA said in a statement.
“Our survey shows that more Australian small businesses shrank in 2021 than grew. Only 32.2 per cent of Australian respondents responded that their business grew last year (survey average 47.3 per cent), while 35.5 per cent reported that they shrank.
“Not only did Australian small businesses record the lowest rate of revenue growth, at 33.7 per cent (survey average 50.2 per cent), only 7.1 per cent increased employee numbers (survey average 28.7 per cent).”
Senior Manager Business Policy, Gavan Ord, warned the below-par results are a wake-up call. “Small businesses are significant to Australia’s economy. They make up around 98 per cent of all Australian businesses, employ over 40 per cent of the domestic workforce and contribute the equivalent of one-third of our country’s GDP.
“I take my hat off to small businesses in Indonesia, the Philippines and India, which led the region by growth. Those markets have also had a tough ride from COVID-19, yet their small business sectors have proven remarkably resilient. This begs the question, ‘Why are small businesses in Australia being out-performed by their regional peers?’
“Our survey shows that part of the answer lies in their inability to participate in the digital economy. There is a positive correlation between digital adoption and business growth. But when it comes to Australian small businesses, technology is their weak link.”
Small businesses lag in eCommerce
Two years after the pandemic began, Australian small businesses are significantly less likely than their regional counterparts to conduct business online. In 2021, 44.7 per cent of Australian small businesses did not generate any revenue from online sales (survey average 19 per cent).
They are also the least likely to accept digital payments (39.4 per cent vs only 0.1 per cent of Chinese small businesses) or to use social media for business (36.7 per cent; survey average 17.2 per cent).
The survey further said that Australian small businesses were the least likely to invest in technology in 2021 (35.1 per cent did not make any investment in technology compared to only four per cent of small businesses from India). Only 5.9 per cent of Australian small businesses expect to innovate in 2022 (survey average 27 per cent).
Ord said that the results show that Australia’s small business sector needs more help. “These are clear signs that current government digital support and incentive programs aren’t delivering for enough small businesses.
“The economic and social benefits of the shift to a digital economy will never be fully realised while significant numbers of small businesses are left on the side-lines. It’s in the national interest for governments to facilitate their inclusion and participation.”
Given the current geopolitical climate, the survey also highlighted cyber security flaws. Only 35.3 per cent of Australian small businesses reviewed their cyber security in the previous six months (survey average 46.7 per cent).
“Cyber security is a national security issue. According to the government’s Australian Cyber Security Centre, Russia’s invasion of Ukraine has increased the likelihood of cyberattacks on Australian businesses.
“Our survey suggests that Australian small businesses under-estimate the prevalence of, and are under-prepared for, cyberattacks. This makes them one of the most vulnerable sectors of our economy, and hence most attractive targets, for cyberattacks.”
There are numerous ways to assist small businesses in improving their digital capability. However, they typically necessitate a significant investment, which foreign governments have proven to be more willing to make thus far. Singapore, for example, has a Productivity Solutions Grant (one of many in the country) of S$600 million (A$605 million) to assist small and medium-sized businesses in digitising and automating their processes.
With a federal election looming, CPA Australia is calling on the major political parties to make a meaningful commitment to small business digital transformation. We think this is a key to Australia becoming a leading digital economy and society by 2030 and to driving Australia’s future prosperity.
“Whichever party forms government, we want them to ensure Australia’s Digital Economy Strategy reflects the importance of small business and supports them to succeed in the digital economy.”
Access to professional advice is one of the predictors of small business success. In 2021, 96.1 per cent of the high-growth businesses we surveyed sought professional advice. On the other hand, small businesses in Australia were the least likely to seek professional advice. CPA Australia recommends providing financial incentives for small businesses to seek professional advice, including digital transformation.
Read CPA Australia’s Asia-Pacific Small Business Survey 2021-2022