Melbourne — 24 November, 2022 —Xero, the global small business platform, today released its latest data on the health of Australiaʼs small business economy from the Xero Small Business Index. Based on aggregated and anonymised transactions from hundreds of thousands of small businesses, the Index is part of the Xero Small Business Insights program.
The Index fell 13 points in October to 115 points, which was driven by all four sub-metrics. Sales growth dropped to single digits (+9.1% y/y), which is the lowest reading since February 2021. Jobs growth slowed to 5.5 percent y/y and wages grew 4.2 percent y/y – above the long-term average, but 0.6 percentage points less than September. The length of time small businesses waited to be paid rose 0.1 days to 23.5 days in October.
Will Buckley, Country Manager, Xero Australia, said: “While the October data is softer than previous months, itʼs important to note that the Index remains above the long term averages.
“Thereʼs no doubt the rising cost of living - driven by inflationary pressures - is challenging Australians across the country with many consumers being forced to re-examine purchases and reduce discretionary spending. This means customers are left with less to spend at local small businesses. Despite this, it is promising to see that small businesses still have the confidence to bring on new employees.”
Wage growth eases
While September saw the largest wage increase since the series began in January 2017 (+4.8%y/y), wages slowed to a rise of 4.2 percent y/y in October.
Wage growth was led by hospitality (+5.2% y/y) and construction (+4.9% y/y). Health care (+3.4% y/y) and rental, hiring and real estate (+3.9% y/y) saw the slowest growth y/y.
Across the states, wage rises ranged from 4.0 percent y/y in Tasmania and West Australia, up to 4.8 percent y/y in the Australian Capital Territory.
Five months of jobs growth acceleration comes to a halt
Jobs growth slowed to 5.5 percent y/y in October, aer a double digit growth of 10.2 percent y/y in September. This, however, is still above the long term average (+3.0% y/y) and comes aer five consecutive months of accelerating jobs growth.
Across all sectors small businesses are employing more people than they were a year ago, led by arts & recreation (+15.7% y/y) and hospitality (+11.4% y/y). The October results revealed agriculture (+0.3% y/y) and construction (+1.7% y/y) were the soest sectors.
The Australian Capital Territory (+10.9% y/y) led jobs growth, while the rest of the regions recorded single digit growth.
“While the October results reveal a slowdown in jobs growth, these numbers are still well above average. On top of this, itʼs promising to see arts & recreation and hospitality industries continue to rebound, leading the charge in jobs for the fourth consecutive month,” says Louise Southall, Economist, Xero.
Sales slow down, but remain strong
Nominal sales grew 9.1 percent y/y in October, slower than Septemberʼs 13.5 percent y/y. When using the September quarter CPI (7.3% y/y) as a proxy for price rises, sales volumes rose by 1.8 percent y/y.
Similarly to the jobs data, the two strongest industries were arts & recreation (+27.6% y/y) and hospitality (+26.4% y/y). Rental, hiring and real estate (+2.1% y/y) recorded the smallest rise in sales.
“Small business retailers are heading into what is traditionally a busy trading period. As cost of living pressures continue to restrict consumers, it will be incredibly important for Australians to shop small this festive season and ensure smaller retailers are better positioned as they head into 2023,” says Buckley.
Across the states, sales growth was underpinned by strong results across the Australian Capital Territory (+15.3% y/y), Victoria (+11.2% y/y) and Queensland (+11.0% y/y), as all three regions recorded double digit sales growth.
Retail sales growth slows across the UK, New Zealand and Australia
Looking at retail sales across Australia, New Zealand and the United Kingdom, October results show retailers are facing slower sales growth over recent months.
While Australian retailers have maintained sales growth for the majority of 2022, averaging 10.0 percent y/y in the first nine months of the year, the October insights reveal single digit growth (+3.5% y/y).
Similarly, New Zealand retail sales growth was in low single digits in October (+2.7% y/y) and the United Kingdom saw retailers experiencing sales lower than where they were a year ago (-5.1% y/y).
Xero Australia | Tiana Barns | +61 401 343 395 | email@example.com
Xero is a global small business platform with 3.5 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 Xeroʼs open platform to 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 is a FIFA Womenʼs Football partner under FIFAʼs new commercial structure.
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