For every dollar spent at a small business, 42 cents is reinvested back into the local community, an analysis commissioned for the launch of "Shop Small" by American Express has found.
The annual Shop Small event is sponsored by American Express and aims to encourage local communities to shop at independent small businesses rather than big outlets over the months of November.
Described as the "Boomerang Dollar", the analysis found 27 cents finds its way back to communities through salaries to residents, 12 cents to local suppliers and three cents to local charities, schools and sponsorships.
"What goes around comes around," American Express vice president for small merchants Katrina Konstas said on Wednesday.
"The Boomerang Dollar effect shows that almost $38 billion is reinvested into our community every year through local spending."
However, consumers are still choosing larger companies over smaller businesses.
Just 29 per cent of consumers say they have increased their shopping frequency with small firms in the past year, down from 37 per cent in 2016.
Despite this, over two in five (43 per cent) small businesses reported increased turnover in the past year, while a fraction fewer were holding steady.
"Loyalty may be an old-fashioned concept, but when you consider that the majority of Australians have lived in their local area for three years or more, the longevity of local businesses is important," Council of Small Business of Australia chief executive Peter Strong says.
