Business Profitability a Dismal 3.8%

Australia’s 2.2 million businesses produce an average return on shareholders’ funds after tax of only 3.8%. This paltry return is less than the risk free 10-year government bond rate of 5.5%, and hasn’t changed in 30 years.

How can this dismal economic performance be possible when Australia’s education standards have improved dramatically over the last 30 years? Today, 27% of Australia’s population have a bachelor degree qualification, versus 7.9% 30 years ago. For all the cost, time, and effort involved in increasing educational standards, it has not resulted in improved business profitability.

In addition, there has been no reduction in business failure rates. Today, we still lose one in eight businesses every year. The economic, plus emotional costs, of 275,000 businesses failing (and closing) every year is enormous.