Australian business ownership hits record low as entrepreneurs stick to self-employment, not hiring staff

Australia’s level of business ownership sank to a record low last year despite self-employment and side-hustling thriving, new data shows. Business creation for solo owner-operators rose from a two-decade low of 12.4 per cent in 2012-13 to 19.8 per cent last financial year, but for employing businesses, it fell from a 2004-05 high of 15.1 per cent to 10.7 per cent, according to a new Committee for Economic Development of Australia report. The decline is not driven by lack of entrepreneurial ambition, CEDA says, with 13 per cent of adults aspiring to business ownership and more than eight per cent working second jobs that they hope will take off. Annie Campbell opened the doors on Leederville-based Re-Rack It in 2024, taking the plunge with the Oxford Street retail outlet after re-selling pre-loved clothes from home via Marketplace, Ebay and Depop for about 15 years. Via Instagram, she discovered the concept of charging customers a fee to rent a rack to display their no longer needed garments and accessories, and the business also pockets a commission on sales. It’s taken off and she aims to hire a staffer within the year, now run off her feet. “I’d always been into sustainable fashion,” Ms Campbell told The West Australian. “It became more of a full time hustle when I started having kids and was a stay at home mum. “Friends eventually started to ask me to sell their clothes for them as a lot of them didn’t like the hassle or didn’t have the time.” But CEDA says such examples are rare, with side hustles rarely translating into growing businesses that hire workers. Chief executive Melinda Cilento said the long-term decline was not a cyclical response, although rising costs and high uncertainty amid global geopolitical instability would be an ongoing dampener. “It is something we need to be worried about . . . and we keep seeing the trend heading in the same direction,” she said. “If we want a more productive, competitive and resilient economy, we need to make it easier for people to turn a good idea into a growing enterprise.” Access to affordable external finance is a major challenge often cited by small and medium businesses, requiring the provision of residential property or other tangible assets as collateral. It was a perennial issue for would-be entrepreneurs, Ms Cilento said, worsened by declining rates of home ownership, particularly for younger people. Ironically, they had the most zeal to own a business, but banks complained about them not being armed with a “proper” business case. “If kids have that appetite, we should ensure they have the skills, training and regulatory environment,” Ms Cilento said. Rocketing insurance premiums were also an issue, underlined by a Federal Government inquiry currently underway, she said. The organisation’s number one call to Government is to reduce unrelenting administrative burdens. ”It’s not opening doors but ongoing compliance costs that weigh on business,” Ms Cilento said. Ms Campbell recommended talking to others already doing it. “Research what sort of business you’ll be starting so you can stand out from the competition,” she said. “Log everything for your taxes everyday so you’re not chasing your tail.” The report showed WA had the smallest decline in start-ups employing staff last financial year, thanks to its “fairly predictable”, cornerstone resources sector, Ms Cilento said. “There’s a pretty solid business opportunity that you can see yourself hooking into,” she said.