Fewer Australians are starting a business, and those who do aren't hiring

The proportion of business owners in the workforce hit a record low in 2025, despite ongoing interest in entrepreneurship and self-employment, a new CEDA report has found.

The report, Hustling, not hiring: Why fewer Australians are starting a business, 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.

“Up to 13 per cent of working-age Australians and 47 per cent of secondary school students want to work for themselves or start a business, but that ambition is not translating into a viable pipeline of new businesses that can grow, hire and contribute to a more dynamic economy,” CEDA Chief Executive Melinda Cilento said.

“This matters because new businesses are the launching pad for future innovation, competition, jobs and economic growth.

“Their dynamism is not necessarily due to their smaller size, but more to their novelty, adaptability, risk appetite, energy and enthusiasm.”

Our analysis shows 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.

By contrast, the total rate of business formation has grown modestly over the past decade. While this seems positive, the result is almost entirely driven by growth in businesses without employees – entry rates for businesses with employees declined steadily through the 2000s and have since been relatively flat.

This growth in businesses without employees has coincided with the rise in second jobs, side hustles and digital-platform work.

“Starting a side hustle or taking on gig work can be a flexible way to get started and gain some hands-on experience,” Ms Cilento said.

“But the evidence suggests most of these activities are intended only to top-up household income and not to build the next generation of employing firms.

“We should not confuse a rise in ‘hustling’ with a rise in business dynamism.”

We also find the rate of creation of employing businesses has declined across all states and most industries over the last two decades.

While all states experienced this long-term slowdown, Victoria has had a slower and weaker recovery in employing business creation since the disruptions of the COVID-19 pandemic. It is the only mainland state not to have increased its growth rate above pre-pandemic levels.

Our analysis shows the decline in business creation is broad-based and not driven by a lack of entrepreneurial ambition. Instead, formation and growth are hindered by structural barriers that make starting and growing a business difficult, including regulation, limited access to finance and market concentration.

“These barriers can weigh particularly heavily on new and small firms, which often have fewer resources to navigate regulation, secure finance or compete against established incumbents,” Ms Cilento said.

To address this, we must refresh the policies, programs and supports that shape Australia’s entrepreneurial ecosystem across all levels of government.

This includes reducing duplicated or outdated regulatory barriers, simplifying information and application processes for grants and support programs, improving access to finance and insurance, better promoting business training and advice, and addressing anti-competitive barriers that make it harder for new firms to enter and grow.

“Australia is not short on entrepreneurial aspiration – far from it,” Ms Cilento said.

“If we want a more productive, competitive, diverse and resilient economy, we need to make it easier for people to turn a good idea into a growing enterprise.

“At this time of rapid technological and geopolitical change we need more types of business to flourish in a broader range of industries, to secure prosperity for Australians now and into the future.”

CEDA Chief Executive Melinda Cilento is available for further comment and interviews.

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Justine Parker
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E: Justine.parker@ceda.com.au | M: 0436 379 688