CPA Australia’s APAC small business survey (part 1)

Garreth Hanley:
This is With Interest, a business, finance and accounting news podcast brought to you by CPA Australia.

Jeffrey O'Sullivan:
In this special episode of With Interest, we bring you a recording of the recent CPA Australia Small Business Survey launch that took place on the 24th of March, 2025 at Parliament House in Canberra.

Part one is a recording of the presentation and part two is the panel discussion. We hope you enjoy this deep dive into the survey results and discussion that covers the opportunities and difficulties facing Australian business.

Elinor Kasapidis:
Hopefully you've found a short summary of the Small Business Survey on your seat, which is a summary focused on Australia of a far more detailed report, which we are here to talk about today.

So, I'm Elinor Kasapidis, Chief of Policy Standards and External Affairs at CPA Australia and welcome to our first in-person launch of CPA Australia's 16th annual Asia Pacific Small Business Survey. This is one of our most important and valued research projects and we're delighted to launch it here with you at Parliament House today.

Thank you for taking the time to join us as well as it's a very busy week in Canberra as we have the budget tomorrow, which makes it an opportune time to be discussing the needs of Australian small business.

Before I go on, I'd like to also acknowledge the Ngunnawal and Ngambri peoples who are the traditional custodians of the Canberra area and pay respect to the elders past and present of all Australia's Indigenous peoples.

So, today's launch here in Australia's capital is one of 11 across the Asia Pacific that we are doing, including Malaysia, Singapore, Vietnam, India, Hong Kong and mainland China. Gavan's actually just back from Vietnam and Malaysia where he delivered the report findings for those countries last week. We're immensely proud of our global reach and the service our members provide to their local communities, including millions of small businesses across the region.

This year's survey brings together the collective experiences of 4,200 small businesses, including more than 500 in Australia. These are the types of businesses that CPA Australia and our members know very well. From sole traders and mum and dad building companies with a couple of employees to e-commerce retailers or service providers with multiple staff on the payroll. And the challenges faced traditionally by many small businesses, such as cash flow and financing, staff recruitment, retention and productivity, and owners' physical and mental fatigue have been exacerbated in the current economic environment.

The cost of simply doing business has increased dramatically. Energy, insurance, raw material, wages and interest rates have all risen sharply, while excessive red tape has taken a stranglehold on the economy. Australian businesses are trailing their Asia Pacific counterparts in many key areas, including the fact that many and most are simply not growing. They are more likely to be stagnant or declining.

We've been running this survey for 16 years and the data from 50,000 small businesses over that time tells us a lot about what makes and doesn't make a successful small business. High growth businesses have a strong focus on technology. E-commerce is important to their business and they are active users of social media, using it to not only promote their business, but also to sell online, engage with customers and analyze customer behaviors.

They are also significantly more innovative and almost all of them seek advice from professionals, including accountants, IT and business consultants. They invest in technology and their people with a clear focus on customers and improving their management skills. They are significantly more likely to pursue overseas sales and new market opportunities.

Successful small businesses are also more likely to be owned by someone under the age of 40. And this survey allows us to examine the performance of our small business sector against other markets. And it shows that small businesses across Asia are outperforming ours. Contributing to this gap is the stronger government backing the sector has in many other markets.

For example, the Singaporean government recently added to its impressive suite of SME digital support programs with a $150 million commitment to supporting small businesses in adopting AI. The Hong Kong government has dedicated financial support for young entrepreneurs. South Korea increased its Newstart fund balance to US $28.7 billion in support for small businesses facing financial difficulties. In 2023, China extended its multiple tax incentives for small businesses straight through to 2027.

In contrast, if you take a look at our business.gov.au site, it's a list of regulations and requirements with some support resources thrown in. To support AI adoption, this government issued a 70-page voluntary AI safety standard for SMEs. The government's national small business strategy that was released several weeks ago also unfortunately did not provide a clear vision for the revitalisation of the sector.

While there are some good initiatives such as Export Finance Australia's support for small and medium businesses, we think Australian small businesses deserve and need so much more from government. We need to drastically reduce the cumulative regulatory burden that is overwhelming businesses. We need government to support small business owners in building their business management skills and looking to overseas markets for growth and inspiration. We need government to streamline, digitise and unify its services to improve business to government interactions and advisor to government interactions. We need to inspire young Australians to become business owners. And we need government to incentivise good businesses to invest in innovation and technology to create great businesses. We need to change course to get the economy going again.

So our message to the next federal government is this: Reform regulations to reduce red tape and compliance costs and improve productivity. Invest in small business through education and targeted incentives, especially in technology. Support small business by removing barriers, balancing bargaining power and providing support for gaps left by the private sector.

It's not only the results of this year's Asia-specific small business survey that show the need for action. Australian small businesses have lagged their Asian counterparts in all the key indicators of business success for some time, making the need for action so critical. I'm now going to hand over to Gavan Ord, CPA Australia's Business International and Investment Lead, who will run through the results in more detail. Thank you, Gavan.

Gavan Ord:
Well, hello everyone. Thank you for coming. Good to see some old friends here. So thank you all for coming. Today we'll be running through the actual detail of what Elinor spoke about. And then after that we'll have a bit of a panel discussion. Bruce will tell a few jokes and we'll get out of here.

So this is a survey we've been running, as Elinor said, for 16 years. This is the first time we've decided to actually release the results, launch the results in Australia in this way. And we thought it's just an opportune time just to reflect on what makes a good business and how Australia performs against what makes a good business. And overall, it's not very good. So we'll go through some of the detail and expand upon what Elinor said.

The methodology, there's some detail there, but we've taken a few pointers. We've defined small businesses as less than 20 employees. I think there's over 140 definitions of small business in Australian law. We've chosen under 20 employees. And that's the definition we use across markets. We did the survey in November and December last year. We deliberately timed the survey to be after the US presidential election, just to make sure there's no change in the results. There's over 4,000 small businesses participated, including 506 from Australia. And since 2009, we've surveyed around 50,000 small businesses.

For us, it's a very robust survey. And one of the things about research is the results keep repeating itself. So the themes that keep coming through in this survey keep repeating itself. And Australian businesses, small businesses, underperform their counterparts in Asia.

So in 2024, Australian small businesses significantly underperformed against the Asia-Pacific average. Continuing a long-term trend, it's not just a one-off. 42% of Australian small businesses reported growing in 2024. Well, well below the survey average of 64%. And this placed Australia second last of the 11 markets surveyed. The red box represents Australia.

But however, there's a slight improvement from 2023. Reflecting this low growth, Australian small businesses also rank lowest in creating new jobs. So not only are they not growing, they're not creating new jobs. And less than half that access finance did so to support growth. So when they are accessing finance, they're not accessing finance for growth.

Looking ahead to this year, the weak results in 2024 are expected to continue. 55% of businesses told us they expect to grow this year compared to the survey average of 71%. And Australian small businesses are among the least optimistic among the Asia-Pacific. So they become third last on this particular slide in terms of growth prospects for this year.

Now this slide is about economic confidence, small business economic confidence. Australia is down the bottom. It's more red than blue. That's not a political statement. So small business confidence in the Australian economy is low. Only 35% of small businesses expect the local economy to grow this year. And that's significantly lower than the survey average of 67%.

In fact, more Australian small businesses expect the economy to shrink this year than grow. So more Australian small businesses expect the economy to go into recession than to grow. But the only economy in the region that's in recession is New Zealand at the moment.

So technology uptake. Elinor spoke about technology uptake and I'll expand upon that. And the reason I do this is one of the reasons for this weak growth is a relatively low level of tech uptake by Australian small businesses.

So firstly, you will see in the following graphs, the Australian small businesses are at the bottom or near the bottom in all indicators of technology uptake. And this relatively low level of technology adoption is an important contributing factor to the sector's low growth.

So this slide here just represents all the indicators of technology adoption and where Australia sits in comparison to the rest of the region. So Australia's last in AI investment. They're last in undertaking review of cybersecurity protections. They're second last in e-commerce. Second last in using social media. Second last in finding technology that improves their profitability. And second last in seeking advice from IT consultants.

So all comes across very, not a great look, but there are actually very good Australian businesses, but just not when you compare it to Asia, there's just not as many of them. And I'll go into each of these in a little bit more detail now.

So this one's on e-commerce. So Australian small businesses are significantly less likely to be involved in e-commerce compared to high growth businesses. And this trend is not actually improving for Australia. 39% of Australian small businesses reported earning more than 10% of their revenue online in 2024, well below the high growth average of 79%. So 40 percentage points below the high growth average. For Australia, online sales peaked at the end of COVID in 2022 and declined somewhat since the end of the pandemic.

Similarly, Australian small businesses are the second least likely to receive income from new digital payment technologies like PayPal and Buy Now, Pay Later. In Australia, most small businesses rely on EFTPOS rather than cash. So cash is not a big component, Michael, of their sales. And this EFTPOS really drives sales in Australia. So they're not really embracing new technologies because there's actually a fairly good technology that meets the requirements.

Social media. So when it comes to social media use, Australian small businesses continue to lag. The blue line at the top represents not using social media. So 32% of Australian small businesses did not use social media in any way last year. Compare that to the high growth average of 8% not using social media. And when Australians do use social media, they employ it in fewer diverse ways of high growth businesses.

On the left hand side over here, the blue bar represents high growth businesses and the yellow bar represents Australian businesses. So when they do use it, it's predominantly to promote their business. They're not looking at things like using social media to learn about behaviors of their customers. So they're not using data analytics to sit behind social media.

Investment in technology is another area where Australian small businesses fall short. only 26% reported that their investment in technology in 2024 improved their profitability. And that's well below the survey average of the high growth average of 76%. So Australian small businesses are ranked second last in experiencing a quick return on their tech investment. And in Australia, they're much more likely to favor investment in technology like computer equipment over technology more closely associated with high growth businesses such as artificial intelligence. So when they are investing in tech, they're buying laptops, they're buying printers. They're not investing in the tech that actually drives business improvement.

So in short, Australian small businesses are not particularly good at selecting and implementing technology that improves their profitability.

So I just want to go into a little bit more detail. This is not in the survey, but I just want to talk about what other governments do. And Elinor did mention a few examples. So there are many reasons why our data shows that small businesses in Australia are not really great at investing in technology. And the main reasons, according to our data, are the age of the business owner, the size of the business, and government support for technology.

Older business owners are more likely to invest in... Sorry. Older business owners are less likely to invest in technology. And Australia has a much older business demographic. Micro businesses, i.e. those with less than five staff, are also less likely to invest in technology that improves their profitability. And Australia also has a much larger proportion of these micro businesses. Additionally, Australian government digital support programs for small businesses are typically not targeted and are much less generous than programs in other jurisdictions, especially in Singapore and Hong Kong. And Elinor spoke about some of those.

Singapore has a comprehensive suite of digital support programs that are more generous and more targeted to certain technologies. And I'll just go and expand upon that a little bit more. In Singapore, there's around five or six different programs. And they're targeted at businesses at different stages of their digital journey. So they're not just a general broad program. It's like, okay, you're at the very basics. Here's some things you can do. Right through to artificial intelligence. And as Elinor said, Singapore just contributed $150 million to small businesses to adopt artificial intelligence into their operations. And Australia, as Elinor said, the government put out a 70 page voluntary AI safety standard. Great idea, but I don't know any small businesses that have some time to implement a 70 page AI voluntary safety standard. Great in concept, not great in practice.

Also, this graph here, we put this graph here because we tracked the announcements in Singapore and Hong Kong. There are digital support programs against the results in our survey. And they show a correlation between the announcements and uptake on online sales. Also, other data we've got there shows that the correlation between these announcements and greater return on investment in those markets as well. So when Singapore do do these announcements, they are actually having a positive impact. In Australia, you can see that blue line here really hasn't moved over the course of seven, no 10 years, which is very concerning to us. I'm happy to go through with you later on if you want to some of the programs in Singapore and Hong Kong.

But as I said before, what stands out to us is there's a suite of programs in Singapore and they're designed for businesses at different stages of their digital journey.

Now, cyber security. This is one area where the data shows Australia is doing okay, but there could be a false positive. So in 2024, Australian small businesses were at a low risk of losing money or time due to a cyber attack, especially in comparison to high growth tech dependent businesses. So only 9% of Australian businesses, small businesses lost time or money due to a cyber attack compared to 54% of high growth businesses. However, this may be more due to lower levels of tech uptake in Australia than through good cyber security processes.

Australian small businesses were the least likely to review their cyber security measures in the last six months. So they're not being cyber attacked, but they're not necessarily taking action to protect their digital assets.

So despite this, I just want to call out that the Australian government industry do have quite a few programs to support businesses with cyber security and particular cyber wardens. And I call that out because it's a good program in that it's available to a large number of small businesses. It's easily accessible and it's focused on one critical issue, not a broad product. It's focused on one issue and one critical issue. So there are good programs in Australia and we can sort of build on those. It has to be focused. It has to be accessible by a large number of businesses and has to be generous.

So challenges, other challenges, maybe might be a better description than just challenges. Australian small businesses remain the least likely to report they will innovate in 2025, especially compared to high growth businesses. Only 8% of Australian small businesses told us they will innovate, told us they will introduce a product, process or service that is new to Australia or the world in 2025, compared to 53% of high growth businesses.

This low focus on innovation by Australian small businesses is unfortunately a long term trend. If I was to present this in New Zealand, it would be very similar results in terms of innovation. So it's something unique to our area of the world.

Costs. So increasing costs continue to dominate small business concerns in Australia and also across much of the region. We're not alone in cost being an issue. In 2024, 48% of Australian small businesses said rising costs was their major barrier to their business, which is higher than the Asia Pacific average of 38%. Only New Zealand reported greater concerns on rising costs.

So what costs were most concern to business? The costs of most concern to Australian small businesses was insurance. And I know Bruce and ASBFEO here have done some really good work at digging into that black box of insurance and trying to try to understand how it works and the costs. But insurance remains the, or insurance has become the biggest cost concern of Australian small businesses.

So 37% nominated insurance costs. The cost of insurance is a major concern. This is the same result as New Zealand, but it's also much higher than the Asia Pacific average is 20%. Insurance is not really a concern outside of Australia and New Zealand.

Utility costs and taxes were also significant concerns. 36% selected taxes and 30% sorry, 36% selected utilities and 30% selected taxes. And yesterday the government announced that they will be extending the energy bill rebate for households and businesses for six months.

So what about solvency? This one's about ease or difficulty to pay debts. So in 2024, 21% of Australian small businesses found it difficult to repay their debts. And this result is largely consistent with the survey average. However, solvency pressures have been slowly building in the Australian small business sector. In 2019, 14% of Australian small businesses found it difficult to repay their debts. Although solvency concerns are growing, it's lower than many other markets, but it is still growing. This year, 19% of small businesses expect to face difficulty paying their debts.

In terms of access to finance, around a third found it easy to access finance. Last year, and 40% found it easy, which is roughly in line with the survey average. However, in 2025, that's not as bright picture. 41% of Australian businesses expect it will be difficult to access finance this year, with only 25% saying it will be easy. And this result compares unfavourably to other markets.

So, we've been saying this for a while, and ASBFEO and Bruce have been saying this for a while as well. Very few young Australians own or operate a small business. According to our survey results, only 21% of Australian small business operators, for owners, were under 40. And compare that to the high growth average of 60%. And this data is consistent with our data compiled by ASBFEO, which found that only 8% of Australian small business owners are under 30. And the most common age of Australian business owners, 50.

Our data shows that around about 55%, 56% of Australian small business owners are over 50. And 31% are 60 and over. How does that compare to high growth businesses? Well, 32% of Australian small business owners are aged 60 or over. For high growth businesses, 4% of high growth businesses are owned by someone 60 or over.

So, why is this important? Well, small businesses owned and operated by someone under 40 are significantly more likely to report business growth. While those owned by someone 60 and over are just as likely to say they are shrinking and growing. Younger business owners are significantly more likely to be creating new jobs, investing in and successfully adopting technology, innovating and expanding into new markets.

I'll just expand upon that a bit more. So, this chart here shows the percentage of businesses that are growing by the age of the respondent. You can see here 60% of nearly 80% of high growth businesses are owned by, well, sorry, I'll say that again. This chart shows the difference between business growth by the age of the owner. It clearly shows the businesses owned and operated by younger people are much more likely to be growing than for someone under 60 or someone 60 and over. You see down here, 33% of businesses owned by 60 and over said they shrink and only 34% said they grew.

So, there's a real reason why we're talking about getting young people into business. Bruce is talking about it as well, because if we get more businesses growing up here, that benefits the economy and benefits jobs.

Also, Australian small businesses are less likely to focus on strategies associated with high growth businesses. They're less likely to be improving customer satisfaction, less likely to be improving strategy, less likely to be improving their skills, and much less likely to be expanding into new markets. Instead, in Australia, they tend to focus more on defensive strategies, such as customer loyalty and cost control. And given that businesses cost is a major issue, that's not necessarily a bad thing, but it helps to explain why they're focused on cost control.

Now, we also looked at why people started a business. We kept getting asked questions around why did they start a business? Well, in Australia, like nearly all other markets, Australian small business owners were primarily motivated by a desire to be their own boss, followed by work-life balance. I don't know how many are achieving work-life balance, but that's why they went into business. They went into business to be their own boss and to work-life balance. It wasn't about financial success. Only 9% said that financial success was their primary motivator of starting a business.

So they're in business to be their own boss. It doesn't mean that financial success is not a driver, it's just not the primary motivator. When they started their business, cash flow was their most significant concern, followed by uncertainty on whether their business will succeed. That's fairly common across most markets. Cash flow and just the uncertainty of the business.

Risk appetite. So on the risk appetite, Australian small business owners are more risk averse than most other markets, with only New Zealand having a greater risk aversion, small business owners in New Zealand having greater risk aversion.

On the other hand, high growth business owners are more likely to be called visionary risk takers. That is, they're taking risks consistent with their long-term vision and also that they're willing to accept short-term setbacks. They're also willing to try new markets and try new technologies. And that is the hallmark of a high growth business.

So in conclusion, I painted a fairly bleak picture of the small business sector in Australia. But that's what our data is showing. And it's not just a one-off. Our data has been showing this for 16 years. And we need something more than just the platitudes of government that will do a little bit of this, a little bit of that.

There needs to be a fundamental shift. We need to get the small business sector moving again. That's 33%, 35% of GDP. If this sector is not growing, the Australian economy is not achieving its full objective. It's not creating jobs. We need a fundamental shift in thinking around the small business sector.

So how do I characterize the sector?

Australian small businesses, their weak growth, low economic confidence, limited focus on innovation, poor technology adoption, comparatively low cybersecurity risk, rising costs are squeezing their margins. They're very domestically focused. They're focusing on defensive strategies. It's definitely an aging business profile and high levels of risk aversion.

I want to finish on a positive, but I can't really, the data doesn't show a positive. But as Yasmin, who will be on the panel, said this before, is that there are many Australian businesses that are growing small businesses that are great examples. There's just not enough great examples out there.

Thank you for that. And now I think now we head to the panel session.

Jeffrey O'Sullivan:
It's clear that the insights from the CPA Australia Small Business Survey are crucial for understanding the difficulties and opportunities that small businesses face today. Thank you for joining us for this special launch episode. Don't forget to check the show notes for links to the complete survey, resources from CPA Australia, and further information on the ongoing support available for small businesses. If you found this episode helpful, please share it with your colleagues and hit the subscribe button so you don't miss our future episodes. Until next time, thanks for listening to With Interest.

Garreth Hanley:
You've been listening to With Interest, a CPA Australia podcast. If you've enjoyed this episode, help others discover With Interest by leaving us a review and sharing this episode with colleagues, clients, or anyone else interested in the latest finance, business, and accounting news. To find out more about our other podcasts and CPA Australia, check the show notes for this episode. And we hope you can join us again for another episode of With Interest. With Interest.