Xero, the global small business platform, today released its latest Xero Small Business Insights (XSBI) update, highlighting that Australian small businesses are persevering amid challenging macroeconomic conditions and still outperforming small businesses in other countries.
September quarter at a glance:
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Sales growth averaged 3.7% year-on-year (y/y) for the September quarter (5.0% y/y for the June quarter)
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Wages growth averaged 2.9% y/y for the September quarter (2.8% y/y for the June quarter)
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Jobs growth averaged 4.8% y/y for the September quarter (4.3% y/y for the June quarter)
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Small businesses waited 22.1 days to be paid in the September quarter (21.7 days to be paid in the June quarter)
Jobs growth remains strong
Small business hiring continued in the three months to September, with jobs growth particularly strong in August (+5.0% y/y) and September (+5.8% y/y) — the September result is the largest increase in two years. There was a noticeable variation in jobs growth across the industries and regions. Job gains were led by public administration (+9.0% y/y) and healthcare (+8.6% y/y), two sectors that are underpinned by public sector spending. Hospitality continued its trend of declining jobs (-0.2% y/y), and was the only industry employing fewer staff than a year ago — the fifth consecutive quarter where this has been the case. Western Australia continues to show the strongest jobs growth (+6.7% y/y), followed by Queensland (+6.0%) and South Australia (+5.1% y/y), whereas Tasmania (+2.3% y/y) had the weakest.
Australian sales growth slowing but still ahead globally
The 3.7% y/y rise in sales in the September quarter is only about half the long term average growth rate for this series, highlighting the challenging environment faced by small businesses. Nevertheless, Australian small businesses continue to outperform all countries tracked in this XSBI series on sales, with the US (-0.9% y/y, June), New Zealand (-2.7% y/y, September) and Canada (-3.7% y/y, June) recording negative sales growth within the latest quarter. Australia also recorded the highest proportion of small businesses creating jobs and the shortest payment times, and is one of the most effective at managing wage cost pressures.
At an industry and regional level, public administration (+12.0% y/y), healthcare (+10.2 y/y) and Queensland (+5.8% y/y) led on sales growth, while hospitality (+0.3% y/y), agriculture (+1.1% y/y) and Tasmania (-0.6% y/y) recorded the weakest results.
“Small businesses are showing continued adaptability despite the economic headwinds. Sales improved in July after experiencing negative growth in June, but this could have been an immediate response to the income tax cuts that started on 1 July, where Australians had more disposable income to spend with small businesses. It’s also an encouraging sign that small businesses still have the means to hire more staff. However, the smaller rise in sales this quarter raises questions around how long small businesses can sustain this while managing cash flow pressures,” said Louise Southall, Xero Economist.
Wages growth shows little change
Wages growth remained steady at 2.9% y/y, a slight uptick on the 2.8% y/y rise in the three months to June. This suggests small businesses continue to pay smaller wage increases than the national average (as measured by the Australian Bureau of Statistics’ Wage Price Index), which for the year to June was 4.1%.
Small business payment times up slightly
Payment times showed a small increase in the September quarter. Payments were made an average of 6.1 days late, compared to 6.0 days in the June quarter, and small businesses waited an average of 22.1 days to be paid, up from a 21.7 day wait in the June quarter. This result was largely due to an abnormally low June quarter result with businesses settling their accounts ahead of the end of the financial year.
Theo Konstantas, Sales Director Australia, Xero, said: “It’s encouraging to see Australian small businesses continue to weather challenging conditions, and fare reasonably well compared to other markets. The slight increase in how long small businesses are waiting to be paid serves as a good reminder for small businesses to think about cash flow and consider offering more ways for their customers to pay. This might include bolstering digital payment methods or using automated invoice reminders. Getting on top of this is crucial for many industries as we come into the end-of-year period and holiday season.”
