Construction surge powers Australian SME growth in 2025

Australian small and medium-sized businesses recorded a second consecutive quarter of growth in the final three months of 2025, led by construction and manufacturing, according to new MYOB data.

The latest MYOB SME Performance Indicator, based on anonymised performance data from October to December 2025, rose 1% over the quarter and 3% over the year. MYOB described it as the strongest half-year run since 2023.

The indicator draws on anonymised data from more than 200,000 Australian businesses employing between one and 19 people. It measures aggregate Gross Value Added and indexes SME productivity against national Gross Value Added to gauge sector performance.

December-quarter growth was driven largely by public construction and manufacturing, both up 3% over the quarter. The result followed a 1% lift in SME output in the three months to September 2025, when manufacturing and financial services rose 6%, and property services increased 5%.

Employment was broadly stable across the year in the data set, while productivity improved. Gross Value Added per employee rose, and profitability was strong in parts of the economy, particularly construction.

In the construction industry, Gross Value Added per employee increased by 5.96% from December 2024 and 1.18% from September 2025. Over the course of the year, construction also added around 8,000 people, despite a slight decline in SME employment overall.

SME performance remained below the wider economy compared with pre-pandemic levels, although the gap narrowed through 2025. SMEs were operating at about 2% below overall GDP, compared with a six-point gap in February 2025.

"The September and December quarters show sustained momentum," said MYOB Chief Executive Paul Robson.

He said productivity had improved despite continued pressure on costs and capacity. "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 said.

Construction lead

Construction was the largest contributor to SME growth in the December quarter. The sector rose 3% over the quarter and 5.3% over the year, its strongest result in three years.

MYOB estimated construction accounts for about 23% of SME Gross Value Added in its indicator and drove roughly 45% of total SME growth in 2025. It linked the contribution to firmer housing and infrastructure activity as parts of the consumer economy softened.

MYOB attributed the uplift to policy changes and public works spending, including the October 1, 2025, expansion of the Home Guarantee Scheme, which removed caps on first home buyer support and lifted income limits. It said this coincided with a surge in residential construction and renovations.

MYOB also pointed to the AUD $16.5 billion infrastructure commitment in the 2024/25 Federal Budget, saying projects moved from mid-2024 announcements to broader engagement with smaller contractors through 2025. It cited projects in Western Sydney, Western Australia's METRONET, and major highway upgrades.

"In September, manufacturing, financial services and property sectors led growth," Robson said. "By December, construction had stepped up alongside manufacturing, helping stabilise the outlook heading into 2026."

Outlook signals

The December-quarter results point to shifting growth drivers across the second half of 2025. Manufacturing featured in both quarters, while construction took a more prominent role late in the year. Financial services and property services led earlier in the period.

MYOB framed the back-to-back quarterly gains as evidence of improving conditions across the SME sector and said stronger productivity metrics could help buffer businesses against cost pressures and capacity constraints.

"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," Robson said.