This report explores the latest trends in business formation in Australia. It identifies measures to improve the operating environment for emerging businesses and calls for a refresh of supporting programs and policies in four key areas: regulation, finance, skills, and culture and competition. It finds Australia has experienced a long-term decline in business ownership rates and in the creation of 'employing businesses' – that is, new businesses that hire workers. 

Building a strong, dynamic pipeline of new businesses that can invest and grow is critical to maintaining a vibrant, resilient and diversified economy. Up to 13% of working-age Australians and 47% of secondary school students want to work for themselves or start a business, but that ambition is not translating into a pipeline of new businesses.

Key findings

• The proportion of business owners in the workforce has declined steadily over the past two decades and fell to a record low last year. 
• The decline has been sharpest for owner-managers with employees and less steep for solo owner-operators. It is evident across all age groups, including younger workers. 
• The decline in business creation is broad-based, suggesting structural barriers such as regulation, limited access to finance and market concentration make starting and growing a business difficult.
• The rate of creation of employing businesses has declined across all states and most industries over the last two decades.

 Recommendations for policy priorities

1. Reduce the administrative burden of running and growing a business.
2. Strengthen entrepreneurial capability and management skills.
3. Expand access to finance and risk protection for new businesses
4. Address structural barriers to entry and competition.