Media releasePublished on 05 March 2024

New Xero data reveals largest decline in Australian small business performance since beginning of the pandemic

Softening sales and wages growth are driving the downward trend

Melbourne — 5 March 2024 — Xero, the global small business platform, today released its latest data on the health of Australia’s small business economy from Xero Small Business Insights (XSBI), covering October through to December 2023.

After coping reasonably well in 2023 despite challenging macroeconomic conditions, XSBI data reveals a slowdown in sales and wages growth is driving softer performance.

Average results for the three months to December

  • Sales growth averaged 5.1% y/y for the December quarter (6.8% y/y for the September quarter)
  • Wages growth averaged 3.0% y/y for the December quarter (2.8% y/y for the September quarter)
  • Jobs growth averaged 3.5% y/y for the December quarter (2.7% y/y for the September quarter)
  • Small businesses waited 22.7 days to be paid in the December quarter (22.7 days to be paid 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 December[1], 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 result[2]), 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.


Media Contact

Jess Brophy | Head of Communications, Australia | +61 431 268 549 |

About Xero

Xero is a global small business platform with 3.95 million subscribers which includes a core accounting solution, payroll, workforce management, expenses and projects. Xero also has an extensive ecosystem of connected apps and connections to banks and other financial institutions helping small businesses access a range of solutions from within Xero’s open platform to help them run their business and manage their finances. Xero is a FIFA Women’s Football partner.


[2] In June the payment time measures were impacted by the end of financial year, which caused both to fall dramatically. This pattern is repeated each year and, as expected, the measure rebounded back to normal levels in subsequent months and has also been revised up from the initial reported time so that the fall is not so dramatic.

For all media enquiries, please contact the Xero media team.

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