SME has strongest run of growth since 2023

Australia’s small and medium sized enterprise (SME) sector has continued its upward trajectory through the final months of 2025, with the latest MYOB SME Performance Indicator confirming another quarter of growth and the strongest run of half-yearly results since 2023.

Based on anonymised small business performance data from October to December 2025, the Indicator rose an additional +1% over the quarter and +3% over the year, reinforcing the gradual improvement seen since early 2025. Growth was largely driven by public construction (+3%) and manufacturing (+3%).

This follows a +1% lift in SME output in the three months to September 2025, led by manufacturing and financial services (both +6%) and property services (+5%), marking consecutive quarters of expansion.

Drawing on anonymised data from more than 200,000 Australian businesses employing between one and 19 people, the MYOB SME Performance Indicator measures aggregate Gross Value Added (GVA), indexing SME productivity against national GVA to assess sector performance.

Employment remained relatively stable over the year while productivity improved, with GVA per employee rising and profitability strong, particularly in construction (+1.18% GVA per employee compared to Sept-2025 and +5.96% compared to Dec-2024).

Although SME performance remains below the wider economy compared with pre-pandemic levels, the gap continues to narrow. SMEs are operating at around 2% below overall GDP, an improvement since Feb 2025 (-6 points).

MYOB CEO Paul Robson says consecutive quarterly growth points to strengthening conditions for SMEs.

“The September and December quarters show sustained momentum,” he says.

“The Indicator confirms the sector has seen gradual improvement through 2025. Despite ongoing cost and capacity pressures, SMEs are lifting productivity and maintaining investment.”

Paul notes a shift in growth drivers between quarters.

“In September, manufacturing, financial services and property sectors led growth,” he says.

“By December, construction had stepped up alongside manufacturing, helping stabilise the outlook heading into 2026.”

Construction was the standout contributor to SME growth in Q4 2025, rising 3% over the quarter and 5.3% annually, its strongest result in three years. According to MYOB data, the sector accounts for around 23% of SME GVA and drove roughly 45% of total SME growth in 2025, offsetting softer consumer-facing conditions.

A major catalyst was the October 1, 2025 expansion of the Home Guarantee Scheme, which removed caps on first home buyer support and lifted income limits. The changes triggered an immediate surge in residential construction and renovations, with tilers, plumbers, electricians, painters and landscapers reporting sharp increases in workload as first home buyers returned with renewed confidence.

Public investment also flowed through. The $16.5 billion infrastructure commitment in the 2024/25 Federal Budget progressed from announcements in mid-2024 to full SME engagement throughout 2025. Projects in Western Sydney, WA’s METRONET and major highway upgrades nationwide supported contractors across the supply chain.

Construction added nearly 8000 workers over the year, even as overall SME employment edged down. 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.”