Media releasePublished on 26 May 2022

Australian small business wage growth hits five-year high, Xero data shows

The Xero Small Business Index rose 4 points in April 2022 to 122 points, the highest Index reading since June 2021

Melbourne — 26 May, 2022 —Xero, the global small business platform, today released its latest data on the health of Australiaʼs small business economy during April from the Xero Small Business Index. Based on aggregated and anonymised transactions from hundreds of thousands of small businesses, the Index, developed in collaboration with Accenture, is part of the Xero Small Business Insights program.

Overall, small businesses in Australia saw another month of improved performance with the Index rising four points in April 2022 to 122 points. This is a result largely driven by wage growth, which is up 4.1 percent year-on-year (y/y) – the biggest increase in the history of Xeroʼs Small Business Insights series since 2017. However, there are signs of emerging risks, with a sharp slowdown in sales growth in April to 5.8 percent y/y from 12.7 percent y/y in March. This is likely to be at least in part due to rising cost of living pressures which is reducing households' capacity to spend at their local small businesses.

Graph of Australia Small Business Index showing an increase of four points in the month of April 2022

Joseph Lyons, Managing Director Australia and Asia, Xero, said: “This month, wages have jumped significantly among small businesses – and at a rate higher than we have seen since the Index began. While this is a positive sign in the health of the sector, we should be cognisant that small businesses are facing rising costs across the board as inflation continues to climb. Itʼs important for the incoming government and broader industry to consider how they can alleviate some of this growing financial burden.”

Wages growth hits record high

Wages rose to unprecedented levels in April to 4.1 percent y/y, a high not seen since the Small Business Index series began in January 2017. This is a reflection of the tight labour market as small businesses struggle to retain staff and compete for new talent. Construction recorded the largest wage rise at 5.1 percent y/y, followed by manufacturing (4.6% y/y) and hospitality (4.5% y/y).

“While this is a record rise in small business wages, inflation is rising faster which is cutting the buying power of households. This means small businesses are facing the dual challenge of managing rising costs alongside falling purchasing power of their potential customers,” says Louise Southall, Economist, Xero.

Sales stall as cost of living bites

Sales slowed in April to 5.8 percent y/y aer 13 months of strong double-digit growth, with industries that rely on discretionary spending significantly impacted. Arts and recreation (+2.4% y/y), education and training (+3.4% y/y), information media and telecommunications (+4.3% y/y) industries all saw growth slower than the national average.

“With the broad-based increase in the cost of living, consumers are shiing their spending to more pressing bills that can not be avoided. This can be seen in the sales results for April - particularly in sectors such as arts and recreation and retail. Industries that are not directly affected by discretionary consumer spend, such as professional services, saw a larger sales increase,” said Southall.

Jobs remain so as the lack of supply flows on

Job growth remained weak in April, falling 1.1 percent y/y aer a 1.3 percent y/y decline in March. With vacancy rates remaining high, small businesses are battling with the inability to find new staff. Western Australia saw the biggest impact with a decline of 2.6 percent y/y potentially due to Omicron case surging and disrupting workplaces.

“The decline in jobs in April is likely not an immediate reaction to weaker sales but rather is still reflecting ongoing challenges in finding staff. However, should sales continue to be so, we could see this start to affect the job market in a few months time,” says Southall.

To download the full April results, including industry and regional breakdowns, go to the website here.

To find out more about how the Xero Small Business Index is constructed, see the background information and methodology.


Media Contacts

Xero Australia | Sophie McCullen | 0435 913 863 |

About Xero

Xero is a global small business platform with 3.3 million subscribers which includes a core accounting solution, payroll, workforce management, expenses and projects. Xero also provides access to financial services, and an ecosystem of more than 1,000 connected apps and more than 300 connections to banks and other financial institutions. Through Xeroʼs open platform, small businesses can connect to a range of solutions that help them run their business and manage their finances. For three consecutive years (2020-2022) Xero was included in the Bloomberg Gender-Equality Index. In 2021, Xero was included in the Dow Jones Sustainability Index (DJSI), powered by the S&P Global Corporate Sustainability Assessment. Xero has been named as a FIFA Womenʼs Football partner under FIFAʼs new commercial structure.

About Accenture

Accenture worked in collaboration with Xero on the design and methodology of the Index prior to February 2022. Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialised skills across more than 40 industries and all business functions — underpinned by the worldʼs largest delivery network — Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders.

Note to editors:

The Xero Small Business Index is unweighted and comprised of the following four metrics:

  • Sales - captures a core measure of small business health and a measure of the overall economic activity in the small business economy.
  • Time to be paid - captures how long businesses are waiting to be paid, providing insight on the financial health of their customers and small business cash flow.
  • Jobs - captures if small businesses are growing and how small business is impacting on the broader economy and community.
  • Wages - captures how benefits from small business performance are translating to employees-benefits flowing to the broader small business economy.

These four metrics were selected because they encompass the operating state of the small business (sales and time to be paid) and the contribution small businesses make to the community (jobs and wages).

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

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