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Xero Small Business Index shows green shoots in sales

Data released last week by Xero produced as part of its small business index shows SMEs continue to struggle through lockdowns. The data shows small businesses are performing below average, containing the downwards trend from July.  

Sales in small business

Despite Australia’s two most populous states being in lockdown, sales numbers grew over August compared to July; sales grew by 6.4 per cent. This is encouraging news, showing the economy may be slowly recovering. 

The nationwide nature of the index may disguise slowed growth in NSW, the ACT and Victoria. Data showed NSW and the ACT recorded the lowest growth; on the other hand, WA and QLD recorded the most robust growth, both upwards of 10 per cent. 

Joseph Lyons, Managing Director Australia and Asia, Xero said, “With more than half the Australian population under stay-at-home orders in August, it was yet another tough month for small businesses as jobs growth slowed to its lowest result since October last year.  

“The Xero, Small Business Insights data does provide some green shoots of hope, with an increase in sales offsetting the weakened jobs growth. Time and again, small businesses demonstrate their adaptability and resilience.” 

Hospitality and arts/recreation were the most significantly hit sectors in August, falling by 11.4 and 6.5 per cent respectively. The healthcare and real estate sectors were the strongest performing nationwide this month. 

Small business jobs

Jobs growth amongst SMEs continues to slow, growing by just 1.3 per cent. This is the slowest jobs growth experienced since October 2020. The small Business sector experienced a growth slowdown nationwide; in NSW, growth fell into the negative at -2.3 per cent.

Louise Southall, Xero Economist, said: “The slowdown in jobs growth is not uniform across Australia. Small businesses in hospitality and arts and recreation are once again being hit much harder than those that can revert to working from home, such as professional services. Similarly, there’s a stark contrast between states, as Western Australia continues to post jobs growth around 7% year-on-year, while in NSW jobs are now 2.3% below where they were in August 2020.”

Hospitality and arts/recreation were hit hardest by the August jobs growth decline. On average these sectors experienced a drop of 5.4 per cent and 4.8 per cent respectively. The industries least impacted were those able to switch to working from home arrangements efficiently. Financial and professional services both saw jobs growth this month of more than 4 per cent. 

The time it took for small businesses to be paid

Xero’s data shows that small businesses had to wait on average an extra 0.5 days to be paid by customers in August. Companies now wait 23.7 days for payment. The additional 0.5 days of wait time may seem insignificant; however, wait times are now the longest they have been since September 2020, when the small business index sat more than 25 points below average at 75. 

Wages in small business

When adjusted against the base rate, wages remained unchanged in August. This trend is positive; however, the growth rate remains below the pre-pandemic level of 3.5 per cent.  

“As Australians continue to roll up their sleeves for their vaccinations in record numbers, small businesses in NSW and Victoria are preparing for their own shot in the arm as reopening dates inch closer. Now’s the time for Australians to support the businesses springing back to life, to give them a much needed boost heading into Christmas and the summer holidays,” Mr Lyons said.

The impacts of the September lockdowns and the two-week ban on construction in Victoria will be assessed in the next monthly update to be released in late October.

Read more:Xero’s Small Business Insights shares key small business findings

Read more: Lockdowns are hurting employment, sales and cash flow: Xero Small Business Index

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