Despite a slowdown in sales, Xero’s Small Business Index for July indicates Australian small businesses recorded the strongest jobs growth in almost a year.
Jobs increased 4.1 per cent year on year, the largest rise since August 2021, including growth in industries which have recently struggled to find talent such as hospitality and agriculture.
“Small businesses remained resilient in the face of inflation and other supply chain challenges according to the July index,” observed Joseph Lyons, Xero Managing Director Australia and Asia.
“While inflation is impacting small businesses globally, our data shows that Australian small businesses are faring slightly better compared to those in New Zealand and the United Kingdom in terms of sales. While this doesn’t mean it’s smooth sailing for local small businesses – as most can attest to – it’s promising to see an overall above-average result, especially for sectors that have been doing it tough.”
New South Wales led all states in jobs growth at 7.7 per cent y/y while Tasmania recorded positive growth of 1.8 per cent y/y for the first time in seven months.
Sales growth, meanwhile, saw a slump from 11.4 per cent y/y in June to 7.5 per cent in July. This has been largely attributed to cost of living pressures, with prices rising faster than wages in the country and thus affecting spending in small businesses.
Louise Southall, Economist at Xero elaborated: “When prices are taken into account, using the June quarter Consumer Price Index, it suggests that the volume of sales rose a smaller 1.4 per cent y/y (down from + 5.3 per cent y/y in June). But this means small businesses still sold more goods and services in July 2022 than they did in July 2021.
“This is different to the experience of small businesses in other countries like the United Kingdom and New Zealand, where sales, excluding price impacts, have actually declined for June and July.”
Xero’s Small Business Index, developed in collaboration with Accenture, now sits around the 2021 average at 111 points.
Interestingly, the data found that despite the increase in the minimum wage, wage growth did not rise significantly. Wages grew by 3.6 per y/y in July, compared to 3.4 per cent y/y in June.
Telecommunications and information media led the charge in wages growth at 4.3 per cent y/y while healthcare recorded the lowest growth at 2.7 per cent y/y.
Xero’s Small Business Index also found that the average time for small businesses to be paid saw an increase, rising to 23.2 days. This follows a 3.0 day fall in June, which was largely due to the end of the financial year when this metric usually experiences a large improvement.