New Xero data reveals Australian small business performance boost after late 2023 slowdown

Melbourne — 24 April, 2024 —Xero, the global small business platform, today released its latest Xero Small Business Insights (XSBI) update, showcasing a strong start for Australian small businesses in the first quarter of 2024. After a soft December, the data highlights the resilience of small businesses, with robust growth in jobs and wages driving this trend.

March quarter at a glance:

• Sales growth averaged 3.5% y/y for the March quarter (5.6% y/y for the December quarter)
• Wages growth averaged 3.2% y/y for the March quarter (3.0% y/y for the December quarter)
• Jobs growth averaged 3.7% y/y for the March quarter (3.5% y/y for the December quarter)
• Small businesses waited 22.6 days to be paid in the March quarter (22.7 days to be paid in the December quarter)

"The improvement from a tough end to last year is a welcome sign that small businesses started 2024 better off. The Index dropped below 100 points in December last year, so it's encouraging to see stronger growth in three critical success levers — jobs, wages, and sales — during the first quarter of this year," said Louise Southall, Xero Economist.

Small Business Index rebounds following weak December result

The Xero Small Business Index averaged 120 points in the March quarter, up slightly from the December quarter result (115 points). This was driven by a sharp jump in the February (127 pts) and March (134 pts) results, which were a significant improvement compared to the December (89 pts) and January (98 pts) readings.

Sales off to a good start in 2024

Sales growth rebounded significantly in January (+6.1% y/y) and February (+6.9% y/y) following a period of weak sales in December (+1.9% y/y), indicating that conditions are improving for small businesses. Sales experienced a drop in March (-2.4% y/y), however, this was likely due to the earlier timing of the Good Friday public holiday when most businesses were closed [1].

Healthcare (+13.5% y/y) and real estate (+10.0% y/y) were the best performing sectors in January and February, and the only industries to record double-digit growth. The ACT recorded the largest sales growth in the first two months (+8.6% y/y), while Tasmania (+4.3% y/y) saw the softest gains.

Jobs growth experiences largest rise since end of 2022

Small business hiring continued in the March quarter (+3.7% y/y) and was moderately higher than average jobs growth in 2023 and the long-term average for this series (3.0% y/y). Jobs growth was particularly strong in the month of March (+4.3% y/y) and was the largest rise in jobs since October 2022, suggesting small businesses are feeling more confident about hiring new staff. The data reveals variation in jobs growth across the industries and states, with the healthcare sector (+9.2% y/y) and Western Australia (+5.8% y/y) leading the gains. In contrast, the hospitality sector (-1.4% y/y) recorded the third consecutive quarter of declining jobs, while ACT (+1.4% y/y) and Tasmania (+1.3% y/y) had the softest jobs growth.

Wages growth picks up

With wages seeing a small increase from the December quarter result, wages growth is now sitting just above the long-term average for this series (+3.0% y/y). However, the pace of growth is still below inflation and small business pay rises are below the national average, as indicated by the latest Wage Price Index rise (+4.2% y/y). This suggests that real wages for small business staff are not yet rising. South Australia (+3.7% y/y) and Tasmania (+3.5% y/y) are once again leading in wages growth, and the hospitality sector (+4.0% y/y) continues to pay the largest wage increases across the industries.

Small business payment times show little change

The time to be paid and late payment measures remained steady in the three months to March, continuing the trend seen throughout 2023. Small businesses waited an average of 22.6 days to be paid in the March quarter (down from 22.7 days in the December quarter), and payments were late on average by 6.5 days (up from 6.3 days late in the three months to December).

“The data from Xero Small Business Insights provides us with a critically important understanding of Australian small business performance. Against challenging economic conditions, it's very pleasing to see a promising start to the year and we're hopeful this momentum can continue. For small businesses looking at opportunities to grow or streamline operations in 2024, particularly as we head into the busy end-of-financial-year period, we'd encourage them to speak with their advisor, and review their biggest pain points and areas to improve productivity. There might be some accessible actions they can take, such as leveraging more tech tools,” said Anthony Drury, Managing Director ANZ, Xero.

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.

ENDS

Media Contact

Jess Brophy | Head of Communications, Australia | +61 431 268 549 | jess.brophy@xero.com

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.

Disclaimer

This media release includes and is in parts based on assumptions or estimates. It contains general information only and should not be taken as taxation, financial, investment or legal advice. Xero recommends that readers always obtain specific and detailed professional advice about any business decision. The insights in this release were created from the data that was available as at the date it was extracted. Data used was anonymized and aggregated to ensure individual businesses can not be identified.

[1] The impact of the Easter break varies from industry to industry. Hospitality and tourism businesses may get a boost over this holiday period. But most businesses lost a day of trade (Good Friday) in March when they would normally be open. There is an historical pattern in the XSBI data of fewer invoices being issued in the month that the Easter break falls in. This can result in a very weak sales growth result if the date for Easter falls in April one year but in March the next.