Dynamic Business Logo
Home Button
Bookmark Button

Credit: Annie Spratt

Sales growth weakest in 3 years, wages flatline

Xero has unveiled its latest insights into Australia’s small business economy through Xero Small Business Insights (XSBI), spanning the period from October to December 2023.

Despite navigating through challenging macroeconomic conditions in 2023, the data from XSBI suggests a moderation in sales and wages growth, leading to a subdued performance.

Key findings for the three-month period ending in December include:

  • Sales growth averaging 5.1% year-over-year for the December quarter, down from 6.8% year-over-year in the September quarter.
  • Wages growth averaging 3.0% year-over-year for the December quarter, compared to 2.8% year-over-year in the September quarter.
  • Jobs growth averaging 3.5% year-over-year for the December quarter, up from 2.7% year-over-year in the September quarter.
  • Small businesses experiencing an average payment wait time of 22.7 days in the December quarter, consistent with the 22.7 days in the September quarter.

Small Business Index drops to pandemic-level low 

The Xero Small Business Index averaged 115 points in the December quarter, down 10 points from the September quarter. A significant shift was seen in December when the Index fell 37 points to 89 points, its lowest level since September 2020 and the first time in a year the Index has dropped below the 100 level. This is the largest single month decline since April 2020, when the economy was essentially closed 

down by the pandemic. 

Louise Southall, Xero Economist, said: “Multiple interest rate rises and higher-than-usual inflation are impacting household budgets and we can see a shift in the December data, particularly in the retail sector. It’s important to acknowledge that the soft December result happened when retailers and hospitality businesses, in particular, expect to be busy with heightened consumer activity. Looking ahead, conditions are likely to remain challenging as interest rates stay high and inflation is still above the central bank’s target.” 

Smallest rise in sales growth in three years 

Sales growth continued its slowing trend in the December quarter, averaging 1.7 percentage points less than the September result (6.8% y/y). Sales only rose 0.9% y/y in December, the smallest rise in sales since January 2021. Across the industries, retail (+1.2% y/y), wholesale trade (-0.1% y/y) and agriculture (-4.0% y/y) were the softest during the December quarter. Meanwhile health care (+13.0% y/y) and education and training (+11.1% y/y) recorded strong sales growth. All states and territories recorded a sharp decline in sales growth in December, with Queensland (+2.2% y/y) showing the smallest decline in growth (down 1.9 percentage points), and South Australia (-0.1% y/y) showing the largest decline (down 7.4 percentage points). 

Wages growth dips in December 

Whilst wages growth remained fairly steady in the December quarter, up slightly from the September quarter result (2.8% y/y), there was a distinct slowdown in December, with wages rising just 2.5% y/y.

This result contrasts the upward trend seen at a national level, with the wage price index (WPI) rising 0.9% in the December quarter and 4.2% in the 12 months to December1, suggesting that small business owners are currently unable to compete with larger businesses on pay increases. South Australia (+3.5% y/y) and Tasmania (+3.4% y/y) showed the largest wage gains in the December quarter, while the hospitality sector (4.0% y/y) recorded the largest increase across the industries. 

Small businesses continue to add jobs 

The drag on the Index from sales and wages was partially offset by a modest pick-up in jobs growth in the final few months of the year. Jobs growth (3.5% y/y for the December quarter) was above the pre-COVID average for this series (3.0% y/y), and showed a moderate increase when compared to the September quarter (2.7% y/y). The hospitality workforce experienced a fall in jobs in the December quarter (-1.2% y/y), while health care (9.5% y/y) and education and training (6.6% y/y) had the fastest growing staff levels. Across the regions, jobs gains were led by Western Australia (6.3% y/y), while Tasmania only managed average jobs gains of 0.2% y/y. 

Small business payment times remain steady 

Payment times showed little change in Australia over 2023 (excluding the abnormal June result2), with the three months to December showing the same result as the September quarter. On average, payments were made 6.3 days late in both the December and September quarters and only slightly longer (6.6 days) in the first half of 2023. 

“In the face of headwinds, small businesses are needing to get creative when it comes to key issues such as finding new customers, staying productive, and addressing staff shortages. This might involve adopting new technologies to streamline processes and unlock opportunities. It’s important that small businesses leverage their support networks, particularly their advisors, during challenging periods to determine some of the actionable steps they can take,” said Theo Konstantas, Interim Country Manager, Xero Australia. 

You can find the latest Xero Small Business Insights Australia Update here. To find out more about how the Xero Small Business Index is constructed, see the methodology.

Keep up to date with our stories on LinkedInTwitterFacebook and Instagram.

What do you think?

    Be the first to comment

Add a new comment

Yajush Gupta

Yajush Gupta

Yajush is a journalist at Dynamic Business. He previously worked with Reuters as a business correspondent and holds a postgrad degree in print journalism.

View all posts