Number of Businesses

IBISWorld expects the number of businesses to rise by 1.5% in 2024-25, to 2.02 million. Easing inflationary and cost of living pressures are anticipated to stimulate a recovery in business confidence, lifting the number of businesses. Expected rate cuts by the Reserve Bank of Australia (RBA) will also help support economic recovery, further driving the number of businesses as economic conditions and consumer sentiment improve. The number of business bankruptcies is anticipated to plunge in 2024-25 as it starts normalising after the surge experienced in the three years through 2023-24, pushing up the number of businesses in the Australian economy. However, many businesses across the economy are still expected to face challenging economic conditions on the back off the relatively high interest rates.This factor will continue weighing down on business numbers.

The pandemic, supply chain disruptions and inflationary pressures created volatile operating conditions for businesses over the past five years. Lockdown measures during the pandemic significantly disrupted the economy. Consumer sentiment and business confidence displayed significant volatility and economic activity stalled, which forced some businesses to close and discouraged new ones from entering. However, financial support programs implemented in response to the pandemic, such as the Federal Government’s JobKeeper wage subsidy scheme, limited the number of business exits at the height of pandemic and contributed to growth in the number of businesses. Other economic factors, like low interest rates, also helped support businesses during the most challenging periods of 2019-20 and 2020-21. The easing of pandemic restrictions and economic recovery drove strong business numbers growth in 2021-22. As inflationary pressures started to build, rising interest rates and supply chain disruptions constrained business activity and growth in business numbers in the three years through 2023-24. Also, supply chain disruptions and rate hikes have wreaked havoc in the construction sector, propelling the number of business bankruptcies and exerting downward pressure on business numbers.