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Entrepreneurship2.1 Business Demography

2.1.1 Businesses in operation by industry

The number of businesses operating in a given industry gives an indication of the market structure and level of competition, which in turn determines how businesses might innovate. At the end of June 2019, there were 2,375,753 actively trading businesses in Australia. This represents an increase of 2.7 per cent from 2,313,291 businesses at the end June 2018. The Transport, postal and warehousing industry grew by 7.7 per cent, whilst the Agriculture, forestry and fishing industry declined by 0.9 per cent. All other industries reported single digit growth. As at 30 June 2019, the highest number of businesses were in Construction (394,575 businesses or 16.6 per cent of total) and in Professional, scientific and technical services (294,471 businesses or 12.4 per cent of total).[41]

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2.1.2 Business entries and exits by industry

Business entries and exits reflect business dynamism, and may be used as proxy indicators for the prevailing conditions for entrepreneurial activity. During 2018–19, the number of new Australian business entries was 355,722 — a very small increase (1,202 businesses) from 2017–18 (354,520 businesses). The number of business exits in 2018–19 was 293,260 — an increase of 4.9 per cent (13,632 businesses) from 2017–18 (279,528 businesses). Industries with the highest number entries in 2018–19 include Construction (63,617 businesses), Transport, Postal and Warehousing (47,974 businesses) and Professional, Scientific and Technical Services (47,156 businesses). The Transport, Postal and Warehousing industry has seen the most dramatic growth in business entries over the last four years, rising by 18.9 per cent in 2015–16, 26.8 per cent in 2016–17, 33.5 per cent in 2017–18 and 27.2 per cent in 2018–19. The industry average rate of exits for 2018–19 was 12.7 per cent, an increase of 0.2 per cent from 2017–18.[42]

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2.1.3 Survival of business entries by industry

The aggregate rate of business survival, while determined by many factors, provides a simple summary measure of the likelihood of entrepreneurial success. Of the 310,435 businesses that entered during 2015–16, some 78.1 per cent (242,540 businesses) survived to June 2017, and 62.8 per cent (194,946 businesses) were still operating two years later in June 2018. The proportion of this cohort that survived the three years to June 2019 was 53.6 per cent (166,405 businesses). Within this cohort, businesses in the Financial and Insurance Services industry had the highest survival rate (65.2 per cent) at the end of 2018–19, followed by those in Health Care and Social Assistance (64.4 per cent), whilst businesses in the Public Administration and Safety industry had the lowest survival rate (43.3 per cent). (Note: The totals shown in the chart exclude businesses where the industry is not yet known, and thus are different from the totals published by the ABS and referred to above).[43]

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2.1.4 Churn rate by industry

The industry churn rate is the sum of the birth and death rates of businesses in the industry per financial year. This captures the creation of new businesses and the creative destruction of established businesses. New businesses are fundamental in delivering innovation to market.[44] The annual churn rate across All industries rose from 26.3 per cent in 2013–14 to 28.1 per cent in 2018–19. While individual industries have different churn rates, most industry churn rates have changed very little over time. The only industry to show significant change is Transport, postal and warehousing, which rose from 28.2 per cent in 2013–14 to 46.7 per cent in 2018–19.[45] The significant rise is partially the result of changes to the Victorian taxi market in 2016 that dramatically reduced the cost of purchasing a taxi or hire car license.[46] The strong residential property market has also allowed new businesses to enter the removalists industry.[47]

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