Australia’s small and medium-sized enterprise (SME) sector extended its growth streak through the final quarter of 2025, with the latest MYOB SME Performance Indicator confirming another period of expansion and the strongest half-year result since 2023.
The Indicator, based on anonymised performance data from more than 200,000 Australian businesses employing between one and 19 people, rose 1 per cent between October and December and 3 per cent across the year.
The gains reinforced the gradual improvement seen since early 2025, with public construction and manufacturing each growing 3 per cent in the December quarter.
This follows a 1 per cent lift in SME output in the three months to September, driven by manufacturing and financial services (both rising 6 per cent) and property services (5 per cent), marking two consecutive quarters of expansion.
The Indicator measures aggregate Gross Value Added (GVA), indexing SME performance against national GVA to gauge the sector’s overall productivity.
Employment across SMEs remained broadly stable during the year, while productivity improved significantly.
GVA per employee increased, and profitability stayed strong — particularly in construction, which recorded a 1.18 per cent rise on September levels and 5.96 per cent year-on-year.
Although SME performance still lags the wider economy compared with pre-pandemic levels, the gap continues to narrow.
SMEs are now operating around 2 per cent below overall GDP, a marked improvement from February 2025, when the shortfall was six percentage points.
MYOB CEO Paul Robson said the consecutive quarters of growth signal strengthening conditions for smaller businesses.
“The September and December quarters show sustained momentum,” Paul said.
“The Indicator confirms the sector has seen gradual improvement through 2025.
“Despite ongoing cost and capacity pressures, SMEs are lifting productivity and maintaining investment.”
Robson noted that the drivers of growth had shifted throughout the year.
“In September, manufacturing, financial services and property sectors led growth,” he said.
“By December, construction had stepped up alongside manufacturing, helping stabilise the outlook heading into 2026.”
Construction emerged as the standout contributor to SME performance in late 2025, rising 3 per cent over the quarter and 5.3 per cent annually — its strongest result in three years.
The sector, which represents around 23 per cent of SME GVA, accounted for roughly 45 per cent of total SME growth during the year, offsetting weaker consumer-facing industries.
A major tailwind came from the expansion of the Home Guarantee Scheme on October 1, 2025, which removed caps on first-home buyer support and lifted income thresholds.
The changes triggered a surge in residential construction and renovations, with trades such as tilers, plumbers, electricians, painters and landscapers reporting brisk demand as first-home buyers re-entered the market.
Public investment also provided momentum.
The $16.5 billion infrastructure package from the 2024/25 Federal Budget advanced from planning stages to full implementation during 2025, supporting SMEs engaged in projects across Western Sydney, Western Australia’s METRONET, and national highway upgrades.
Construction added nearly 8,000 workers over the year, even as overall SME employment edged slightly lower. Productivity gains and easing costs helped protect margins.
“Construction SMEs are central to housing and infrastructure delivery, and their performance has helped keep overall SME growth positive,” Paul said.
“The second half of 2025 delivered consecutive quarters of growth, narrowing the gap with the broader economy and placing SMEs in a steadier position entering 2026.
“If infrastructure and housing pipelines remain in place and businesses continue investing in productivity, we expect SMEs to maintain a cautiously positive trajectory, even with interest rates remaining higher for longer.”
