Small and medium sized enterprises across Australia continued to expand through the final quarter of 2025, with the latest SME Performance Indicator from MYOB confirming another period of improvement and the strongest six month result recorded since 2023. The index, which analyses anonymised data from more than two hundred thousand businesses with up to nineteen employees, rose by one percent between October and December and increased three percent across the year. These figures build on the steady progress seen since early 2025, with construction and manufacturing each growing by three percent in the December quarter.

The uplift followed a one percent rise in SME output in the September quarter, driven largely by manufacturing and financial services, which both posted six percent growth, as well as property services at five percent. That brought two consecutive quarters of expansion. The indicator measures the total Gross Value Added contribution of SMEs and compares it to national output to assess broader productivity trends. Employment across the SME sector remained relatively stable, while productivity strengthened. GVA per employee improved and profitability remained solid, particularly in the construction sector, which recorded a one point one eight percent increase compared with September and nearly six percent growth over the year.

Although SME performance still trails the wider national economy compared with pre pandemic levels, the gap has narrowed substantially. SMEs are now operating roughly two percent below national GDP, a notable shift from early 2025 when the shortfall reached six percentage points. According to MYOB chief executive Paul Robson, the back to back quarters of growth show that conditions for smaller businesses are improving. He said that despite cost pressures and capacity constraints, SMEs are boosting productivity and continuing to invest.

Robson also noted that the drivers of growth changed throughout the year. In September, manufacturing, financial services and property services provided the strongest gains. By December, construction had taken the lead alongside manufacturing, helping stabilise momentum as the sector moved into 2026. Construction ultimately became the dominant contributor to SME performance at the end of 2025, rising three percent in the December quarter and five point three percent over the year, marking its best performance in three years. With construction representing around twenty three percent of SME GVA, the sector accounted for nearly forty five percent of total SME growth during the year and helped offset weaker conditions in consumer facing industries.

A major boost came from changes to the Home Guarantee Scheme introduced on the first of October 2025. The removal of property price caps and the expansion of income limits opened the door for thousands of first home buyers to re enter the market. This led to a surge in residential construction and renovation activity. Trades including tilers, plumbers, electricians, painters and landscapers all reported increased demand as the housing sector gathered pace.

Source: Build Australia