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Small businesses are experiencing heightened volatility after recent impacts of the Omicron wave with the Xero Small Business Index declining six points in January as the “shadow lockdown” hampered summer results.
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Small businesses hit hard by Omicron impact after volatile summer: Xero
01 March 2022
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Xero, the global small-business platform, has released its latest data on the health of Australiaʼs small-business economy during January from the Xero Small Business Index. Based on aggregated and anonymised transactions from hundreds of thousands of small businesses, the index is produced in partnership with Accenture and is part of the Xero Small Business Insights program.
The index declined six points during the first month of 2022 to 86 points, a dip largely attributed to the surge in Omicron cases across the country.
The decline is a significant reduction from the high in November (107 points) and comes after two months of strong sales growth, when small businesses made the most of reduced lockdown restrictions and festive season spending.
“Looking at Januaryʼs decline after the highs of Christmas trading in November and December, thereʼs no doubt this Index reflects the heightened volatility many small business owners have experienced these past few months,” Joseph Lyons, managing director Australia and Asia, Xero, said.
“Xero’s data tells us that small businesses can bounce back from tough times, and with COVID-19 restrictions easing, case numbers falling and national and international travel returning, thereʼs cause to be optimistic.”
Sales growth slows after December highs
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In line with Christmas spending, December saw a growth in sales almost double its average pace at 15.1 per cent year-on-year (y/y), according to the report. Following the festive period sales growth slowed to 5.7 per cent y/y in January – an expected dip as the number of Omicron cases grew significantly.
Sales in NSW (+6.4 per cent y/y) and Victoria (+4.3 per cent y/y) were well down on the growth rates recorded in December (14.8 per cent y/y and 15.4 per cent y/y respectively) as small businesses and customers were impacted by rising COVID-19 cases. Sales in Queensland also slowed, from 14.6 per cent y/y in December to 7.4 per cent y/y in January.
The strong tourism focus on the state may have helped it maintain a stronger sales growth rate than NSW and Victoria despite also having rising COVID-19 cases.
Industry data also reflected a significant divergence where industries such as financial services (+16 per cent y/y), admin services (+15.8 per cent y/y) and real estate (+11.7 per cent y/y) recorded the strongest sales growth.
Meanwhile, sales in hospitality fell (-7.5 per cent y/y) and retail (0.7 per cent y/y) and arts & recreation (+1.3 per cent y/y) saw the slowest gains, as potential customers avoided these types of venues due to concerns about rising COVID-19 cases.
Job recovery stalls whilst wages continue to grow
January saw a weaker result in job growth, with jobs actually declining 1.5 per cent y/y compared to a rise of 1 per cent y/y in December. Xero observed that spikes of COVID-19 cases across the country, isolation requirements and summer holidays resulted in fewer people recording the one-hour work needed to be classed as working in the Xero series.
Of the biggest states, NSW was hit the hardest with jobs down 2 per cent y/y, followed by Victoria falling 0.8 per cent y/y and Queensland down 0.7 per cent y/y.
Education jobs saw a sharp decline of 13.9 per cent y/y, the largest drop in jobs for the sector since May 2020 when the first wave of the pandemic hit.
“The fall in jobs for the education sector could reflect the still comparatively low numbers of international students in Australia as the border reopening schedule was delayed by Omicron. However, as Australiaʼs borders reopen, weʼre likely to see more of these students return to Australia which should support future jobs growth later this year,” Louise Southall, Xero economist, said.
“The arts and recreation (-4.9 per cent y/y) and hospitality (-4.7 per cent y/y) sectors also recorded a fall in jobs. Conversely, sectors that enable working from home saw an increase, with administration (+4.8 per cent y/y) and professional services (+2.8 per cent y/y) able to better manage the disrupted period.”
Meanwhile, wages saw growth rising to 3.4 per cent y/y, up from 2.5 per cent y/y in December with hospitality (+4.9 per cent y/y) and retail (+4 per cent y/y) sectors seeing significant growth, according to the index.
“The rise in hospitality wages is a direct reflection of the shortage of overseas staff that this sector normally heavily relies on. With borders gradually opening, we’re expecting to see these figures stabilise over the year as small businesses have access to more workers,” Ms Southall explained.
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