AUSTRALIA | Xero Small Business Insights (XSBI) update highlighted that Australian small businesses persevered amid challenging macroeconomic conditions and outperformed small businesses in other countries.
Small business hiring continued in the three months to September, with job growth particularly strong in August (+5.0 percent y/y) and September (+5.8 percent y/y). The September result has been the most significant increase in two years.
There was also a noticeable variation in job growth across the industries and regions. Job gains were led by public administration (+9.0 percent y/y) and healthcare (+8.6 percent y/y), two sectors underpinned by public sector spending.
Hospitality continued its trend of declining jobs (-0.2 percent y/y) and was the only industry employing fewer staff than a year ago—the fifth consecutive quarter in which this has been the case.
Western Australia continued to show the most vital jobs growth (+6.7 percent y/y), followed by Queensland (+6.0 percent) and South Australia (+5.1 percent y/y), whereas Tasmania (+2.3 percent y/y) had the weakest.
The 3.7 percent y/y rise in sales in the September quarter was only about half the long-term average growth rate for this series, highlighting small businesses' challenging environment. Nevertheless, Australian small businesses continued to outperform all countries tracked in this XSBI series on sales, with the US (-0.9 percent y/y, June), New Zealand (-2.7 percent y/y, September) and Canada (-3.7 percent 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 the industry and regional level, public administration (+12.0 percent y/y), healthcare (+10.2 y/y) and Queensland (+5.8 percent y/y) led on sales growth, while hospitality (+0.3 percent y/y), agriculture (+1.1 percent y/y) and Tasmania (-0.6 percent 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. However, this could have been an immediate response to the income tax cuts that started on the 1st of July, where Australians had more disposable income to spend with small businesses,” said Louise Southall, Xero Economist.
“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.”
Wages growth remained steady at 2.9 percent y/y, a slight uptick on the 2.8 percent y/y rise in the three months to June. This suggested small businesses continued 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 percent.
Payment times showed a slight 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 was 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,” said Konstantas.
“This might include bolstering digital payment methods or using automated invoice reminders. Getting on top of this is crucial for many industries as we enter the end-of-year and holiday season.”
