Australia’s small business obsession.

Unlike its pineapples, this country likes its businesses best small.

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The federal government continually showers the small business sector with largesse. One of the most-publicised announcements next Tuesday is a tax cut for small businesses. Tony Abbott is spruiking that 95 per cent of businesses will access the tax cut. Which is true, because most business are small.

But most business is done by big businesses. That’s where more people work. And they thrive despite much tougher regulatory and tax standards. Small businesses get an easy run on labour law and tax law. They’re not eligible for the special tax Mr Abbott introduced at the last election to fund his parental leave scheme.

I know – I run a (very) small business as a sole trader and I don’t even have to collect GST. It’s actually administratively very simple.

But how good is this for the economy? Should we encourage small business?

  • small business survival

DATA SOURCE

A huge number of small businesses just disappear. Every single one of them represents disappointment and sorrow, and probably years of work and capital equipment that now is useless.

Small businesses come with real economic and social costs. You might support small business if they reliably turned into big businesses.

But even the ones that survive simply hang on. Of the 500,000 small businesses that employed 1-4 people in June 2013 and survived the year, most did not fare well.

  • 52,000 of them now had no employees – about 10 per cent.
  • 423,000 were the same size.
  • And just 34,000 got bigger. (Of those, 1000 now employ more than 20 people and 27 more than 200 people.)

Government woos small business because there are so many of us. We’re a voting bloc. But economically, it makes little sense.

Published by

thomasthethinkengine

Thomas the Think Engine is the blog of a trained economist. It comes to you from Melbourne Australia.

2 thoughts on “Australia’s small business obsession.”

  1. I reckon this is emotional politics at its best – appealing to the aspirational capitalist-leaning middle class. many people working in large businesses still have a desire or distant dream (that most will never act on) of starting their own small business. they all have personal connections with small business owners (as opposed to the select few that have personal connections with owners/managers of large businesses) so they can personalize this and it appeals to their emotional side. even if they never take the leap, they take comfort in the fact that the option is available and the government supports entrepreneurship and small enterprise. the ratio of voter influence v financial impact of tax cuts to small business is a better return than tax cuts for large business.

    Liked by 1 person

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