Defining the SME economy
SME, short for small and medium enterprise, is used widely across official statistics, lenders and commentators, but defined inconsistently. That makes figures about the sector hard to compare from one source to the next. This page sets out the boundary the Shift SME Economy Index works to, how the main external sources map onto it, and why that consistency matters, both for comparing figures across sources and as new data is published over time.
Bigger than any single industry
Australia’s SME economy is not a single industry but a cross-section of the whole economy. Businesses under the ABS’s threshold for an SME would be the country’s largest industry by a wide margin, on both activity and employment, if they were counted as one.
The SME economy compared with named industries, by gross value added and by employment
GDP Contribution
Employment Contribution
Note: These figures are sized on an employee basis, the only basis the public sources publish. Shift’s SME Index measures the SME economy by revenue, so the two are not directly comparable. The mapping between the two is set out below.
Source: ASBFEO.
SME economy = assumed as businesses with <200 employees.
There is no shared definition of SME
Even when discussing the SME as a single entity, definitions vary across government agencies, making it difficult to pin down what a typical SME business looks like. Different sources measure the SME economy for different purposes and so draw the boundary in different places: by employees, by revenue, or by no fixed boundary at all. Each is suited to its own use. They were not designed to align, so figures drawn from different sources rarely describe the same population.
Even among the sources that use revenue, the upper end of the scale ranges from $10m to $75m.
Source | Definition | Measured by |
|---|---|---|
ABS | Employee bands: small 0 to 19, medium 20
to 199 | Employees |
ATO |
Small business at revenue under $10m | Revenue |
APRA |
Revenue under $75m, then split into small and medium by loan exposure rather than revenue | Revenue |
ABS | Follows RBA | Revenue |
A consistent read of the SME economy requires a boundary that holds still from one source to the next.
One definition, applied consistently
The RBA and APRA already draw the SME limit at $75m in annual revenue. Rather than introduce a further definition, Shift’s SME Index adopts that established limit and segments within it. Anchoring to a limit the regulators already use keeps the Shift SME Economy Index consistent with official credit and prudential data instead of competing with it. The limit is shared; the three segments inside it are Shift’s own.
Source | Definition (annual revenue) |
|---|---|
Small |
Under $1.5m |
Established | $1.5m to under $10m |
Corporate | $10m to $75m |
Mapping the other sources
Where external sources use different cut-offs, they are mapped to this frame rather than forced into it, with each mapping shown rather than assumed.
Source definition | Their cut-off |
Maps to Shift |
|---|---|---|
ABS | 0 to 19 employees | Small and part of Established |
ABS Medium | 20 to 199 employees | Part of Established and corporate |
ABS Large | 200+ employees | Outside the SME universe |
APRA SME Retail | Revenue under $75m, exposure under $1.5m | Majority of Shift |
APRA SME Corporate | Revenue under $75m, exposure $1.5m or more | Part of corporate |
RBA Small | Revenue under $75m, exposure under $1.5m | Majority of Shift |
RBA Medium | Revenue under $75m, exposure $1.5m or more | Part of corporate |
ATO Small business | Revenue under $10m | Small and Established |
Comparable across sources
A shared definition lets the conversation start from common terms and lets the other sources be read alongside this one instead of in isolation. It also allows a different question: not just how the sector is doing in aggregate, but how differently SMEs are doing from one another, the spread between the typical business and the total that a single headline figure conceals. Most measures cannot see that dispersion.
A consistent boundary makes this visible. For policymakers, lenders and the businesses themselves, a number that otherwise changes with its source is instead measured the same way each time.
Sources and methods
The supporting data, references and methodology that sit behind the Shift SME Economy Index are available upon request.