Brad Jones: Financing SME innovation in Australia - challenges and opportunities

Speech by Mr Brad Jones, Assistant Governor (Financial System) of the Reserve Bank of Australia, at the COSBOA National Small Business Summit, Sydney, 4 April 2024. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

Introduction

Small and medium-sized firms (SMEs) are in many ways the backbone of the Australian economy. At the Reserve Bank, the importance of SMEs has long been reflected in our analytical research agenda and our liaison program. Indeed, last July the RBA hosted its annual small business financing roundtable event for the 31st time, while our liaison program – which includes active year-round engagement with SMEs spanning the breadth of the country – is now into its 24th year.

There are different ways through which to view the contribution that SMEs make to our economy and society.

The first (and most familiar) is through their central role in the daily life of our communities. Of the 2.6 million businesses in Australia, 97 per cent are characterised by the Australian Bureau of Statistics as 'small' firms (comprised of less than 20 employees), with a further 2 per cent of firms classified as 'medium-sized' (between 20 and 200 employees). SMEs are widely represented across the sectors of the Australian economy. A particularly notable contribution they make is through the labour market, where SMEs account for two-thirds of private sector employment. They also comprise just under 60 per cent of company profits. More than this, SMEs are integral to the social fabric of our communities – whether it be sponsoring the local kids sporting team, community theatre production or charity event. Nowhere is this more true than in regional Australia, where many SMEs are family-run businesses that provide goods and services in areas where larger firms are less active.^[2] And who doesn't have a favourite weekend 'local'?