Small business in ‘recession’ as public service thrives

Fewer small businesses are employing staff than when Labor came to office despite robust population growth, which the opposition is linking to the government’s decision to hire tens of thousands of public servants.

Deputy opposition leader Sussan Ley said there were 31,900 fewer small businesses employing Australians than when Labor took office, taking the number from more than 953,000 to about 922,000.

“This looks like a small business recession to me,” Ley said. “These numbers again confirm we are seeing an ‘albonomics ratio’ – Australia is putting on a permanent public servant for every small business we are losing.”

While the number of small businesses employing Australians has slipped, the wider definition of “small business” which includes sole traders, has continued to grow under Labor, with the most recent financial year data showing there were about 300,000 new small businesses created in the past year.

The fresh claims from the Coalition come amid a debate on the growth of jobs in the public service and sectors with major taxpayer funding such as health and education, which have substantially outpaced the growth in employment in the purely private sector.

The Coalition has labelled the 20 per cent growth in the federal public service, amounting to 36,000 additional public servants, “wasteful spending”. It has not revealed how many will be cut beyond ruling out redundancies in frontline services.

Community and Public Sector Union national secretary Melissa Donnelly claimed any cuts from the public service would mean pensioners, students and people with disability would have to wait longer for support and only benefit big consultancies.

“More than half of these 36,000 public service jobs are based outside of Canberra,” she said. “If Peter Dutton gets rid of them, he is ripping jobs out of regional communities and local economies.”

Minister for small business Julie Collins took issue with the Coalition’s definition of small business, saying it was “an insult to hard-working sole traders” across Australia.

“Whether it’s a hard-working tradie in Western Sydney, an online retailer in North Queensland or a farmer in our regions, these workers are part of our small business sector,” she said. “Does this mean the Coalition is planning to exclude sole traders from policies that benefit small businesses like the instant asset write-off? Are sole traders excluded from the long lunches for bosses policy? Maybe this explains why the Liberals can’t figure out their costings.”

The Coalition has promised to allow small businesses to claim a tax deduction for business lunches but is yet to release the costings for its policy.

Council of Small Business Organisations Australia (COSBOA) chief executive Luke Achterstraat while there had been an increase in the number of sole traders, there was still the risk of a shrinking small-business sector.

“Sole traders, including self-employed traders and builders, could be people with side hustles,” he said. “I’d caution against the government celebrating that because it could be people taking on second or third jobs because of the cost of living. The data makes it clear there’s a risk of sleep-walking towards a smaller share of small businesses.”

Achterstraat said while there was a range of factors behind the decline in small businesses – including interest rates and higher input costs including energy, rent and insurance expenses – increased red tape, industrial complexity and compliance costs were weighing down businesses.

Independent economist Chris Richardson said while government regulation had an outsized impact on businesses, elevated interest rates were more important.

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