Latest Xero Small Business Index Australia Update

The latest Xero Small Business Insights data for Australia shows that in the three months to September 2023, small business performance was down marginally overall, but remains remarkably resilient given the challenging economic environment of high interest rates and persistent inflation.

Xero Small Business Insights aim to create insights to help inform decision-makers in support of the small business economy as a whole. The principal source of small business insights in this report is customer data from Xero – a small business platform that supports online accounting and a range of other applications. Xero is a responsible custodian of our customers sensitive data and does not release any data that could identify individual businesses. The data used is aggregated and anonymized to ensure the privacy of Xero subscribers, and their counterparts.

Sales

In September 2023, Sales increased 5.5% compared to the same period last year, with the growth rate averaging 6.2% during the three months leading up to September 2023.

This trend represents a noticeable slowdown from the 10.0% year-over-year growth experienced in the first half of 2023. At present, the rate at which sales are growing has fallen below the average growth rate of 7.8% that was recorded before the COVID-19 pandemic.

This deceleration in sales growth is certainly a point of concern but not entirely unexpected. The economic climate has been challenging, marked by high interest rates and persistent inflation, which have significantly impacted consumer spending habits. These factors have put considerable pressure on household budgets, influencing the purchasing power of consumers and, consequently, affecting the sales growth of businesses.

Wages

In September 2023, Wages increased by just 1.9% compared to the same month in the prior year. Over the three months leading up to September 2023, the average wage growth was 2.7%. This growth is slightly slower than the average 3.1% increase we saw in the first half of the year.

Before the pandemic, from January 2017 to December 2019, wages typically grew by about 3.0% each year. Now, we’re seeing growth that’s just below this average.

Although this slow wage growth helps control inflation and costs for small businesses, it’s not great news for sales. Real wages are dropping, which means people have less money to spend. This puts more strain on household budgets and could lead to less spending in small businesses.

Jobs

In September 2023, Job numbers went up by 3.0% compared to the same in the previous year. For the three months leading up to September 2023, the job growth rate was 2.7%. This is very consistent with the average growth we saw in the first half of 2023, which was 2.8%, and matches the job growth average from before the pandemic, from January 2017 to December 2019, which was also around 3.0%.

During these three months, the largest increases in jobs were in health care, which saw an 8.0% jump, education and training, with a 6.0% rise, and public administration and safety, which increased by 5.9%. However, not all industries saw growth. The hospitality and real estate sectors actually saw a decrease in jobs, dropping by 0.5% and 1.0% respectively.

Looking at the situation across different states, Tasmania was the only one where job numbers fell, decreasing by 0.4% over the three months to September 2023. On the brighter side, Western Australia led the way with a 6.0% increase in jobs, followed by South Australia with a 4.0% rise, and Queensland, where jobs grew by 3.4%.

Time to be paid

Ignoring the results from June 2023, the time it took for small businesses in Australia to get paid has pretty much stayed the same this year. On average, businesses waited about 22.9 days to get paid in the three months leading up to September 2023. This is very close to the 22.8 days average wait time seen in the first five months of 2023.

When it comes to how late these payments were, on average, they were about 6.5 days late in the three months to September. This is slightly better than the 6.7 days late average in the first five months of 2023.

However, it’s important to note that not all industries experience the same wait times for payments. For instance, small businesses in the healthcare sector only had to wait an average of 1.9 days past the due date for payments in the three months to September 2023. In contrast, those in the wholesale trade and education and training sectors had to wait much longer, with average late payments of 12.5 days and 9.5 days, respectively.

Xero is a global small business platform with 3.7 million subscribers which includes a core accounting solution, payroll, workforce management, expenses and projects. If you want to start using the best cloud accounting software, contact the team at MKS Group, as Platinum partners with Xero, we are ranked in the top 2% of Xero partners Australia-wide.

(03) 9374 8400

hello@mksgroup.com.au