Recent Xero data reveals the ongoing resilience of Australian small businesses despite a deceleration in sales and wages growth. Sales growth remains stronger compared to other XSBI markets.
Xero, the global small business platform, has released its most recent data from the Xero Small Business Index (XSBI) for the period spanning July to September 2023.
Key points for the September quarter:
- Sales growth averaged 6.2% year-on-year for the September quarter.
- Wages growth averaged 2.7% year-on-year for the September quarter.
- Jobs growth averaged 2.7% year-on-year for the September quarter.
- Small businesses had to wait an average of 22.9 days to receive payments in the September quarter.
Sales growth has shown a gradual slowdown, rising by only 5.5% year-on-year in September and averaging 6.2% year-on-year in the three months up to September. This indicates that sales are now growing below the pre-COVID average of 7.8% year-on-year. Encouragingly, Australia’s sales growth surpasses the results of the five XSBI countries, including Australia, New Zealand, the United Kingdom, the United States, and Canada.
“Despite a slight drop in small business performance in recent months, Australian small businesses exhibit remarkable resilience, considering the challenging economic environment marked by high interest rates and persistent inflation. Notably, sales growth in Australia outpaces other XSBI markets,” stated Louise Southall, Xero Economist.
The Small Business Index has remained relatively steady, declining by two points in September to 121 points. For the three months leading to September, the Index averaged 122 points, only slightly lower than the first half of 2023, which had an average of 127 points.
The health care sector saw the most robust sales growth in the three months to September (+13.2% year-on-year), followed by education and training (+10.5% year-on-year), construction (+8.1% year-on-year), and public administration and safety (+7.7% year-on-year). The weakest industries included agriculture (-6.2% year-on-year), wholesale trade (-1.1% year-on-year), and retail trade (-0.8% year-on-year). All Australian states and territories reported slower average sales growth in the September quarter, with Queensland showing the highest increase at 7.5% year-on-year, while Tasmania exhibited the lowest growth at 2.8% year-on-year.
Wages growth has further decelerated, reaching only 1.9% year-on-year in September. The hospitality sector saw the most substantial wage increases (+4.4% year-on-year), while health care had the smallest (+1.8% year-on-year). These results, while positive for inflation and cost control in small businesses, pose challenges for sales growth as real wages continue to decline, putting additional pressure on household budgets.
Job growth remained steady, with a 3.0% year-on-year increase in September, similar to the pre-COVID average from January 2017 to December 2019. In the three months leading to September, health care experienced the highest job growth (+8.0% year-on-year), while hospitality (-0.5% year-on-year) and real estate (-1.0% year-on-year) saw job losses. Tasmania was the only state with a decline in jobs (-0.4% year-on-year), while Western Australia (+6.0% year-on-year), South Australia (+4.0% year-on-year), and Queensland (+3.4% year-on-year) led in job gains.
Small business payment times have remained relatively stable in Australia throughout the year, with payments to small businesses averaging 6.5 days late. However, payment times varied significantly across industries, with health care businesses experiencing the shortest delay, averaging only 1.9 days late in the three months to September, compared to wholesale trade (12.5 days) and education and training (9.5 days).
“In spite of the challenges faced this year, Australian small businesses are holding their ground and even thriving in some sectors. With the holiday season approaching, we encourage Australians to support small businesses in any way they can, whether through shopping small, leaving positive reviews, or connecting with business owners. Retail and hospitality, after facing a few difficult months, are hoping for a resurgence during the festive season,” commented Will Buckley, Country Manager at Xero Australia.