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Australian small businesses experienced high growth in jobs but saw declines in other areas, recent Xero data has shown.
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Data reveals mixed trends for SMEs in June quarter: XSBI
25 July 2024
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The global small business platform released its latest Xero Small Business Insights (XSBI) update this week for the June quarter.
The data highlighted small businesses experienced strong jobs growth and improved payment times, contrasted by volatile sales.
The conflicting balance of results demonstrates the complex economic environment small businesses are currently operating in.
The index highlighted a 4.5 per cent average in jobs growth, the largest rise since October 2022.
For the June quarter, the XSBI also showed sales growth averaged 3.9 per cent, wages growth averaged 2.9 per cent and small businesses waited an average of 21.3 days to be paid.
The June quarter also saw a jump in index points, which averaged 142 points compared to 121 points in the March quarter.
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Xero said this increase can likely be attributed to an improvement in June payment times, as the index surged to 162 points.
However, the April and May average of 132 points is a more reliable reflection of small businesses' current performance.
Xero economist Louise Southall said the contrast in trends indicates how small businesses are presently coping and operating in the market.
“The continued jobs growth is positive to see, however, the decline in sales in June is something to watch,” Southall said.
“Softening wages growth suggests small businesses may be managing the jobs and sales mismatch by offering smaller pay rises to employees.”
In terms of jobs growth, there was a noticeable variation across the regions and industries in the June quarter.
Public administration and healthcare, usually underpinned by public sector spending led the industry gains while hospitality showed the “softest” results.
Western Australia, South Australia and Queensland experienced the strongest growth across all of states and territories, the XSBI indicated.
“The ongoing strength in jobs could be due to an eagerness among small businesses to retain staff and avoid risking future skills and shortages,” Xero said.
Regarding sales growth, the XSBI demonstrated the first decline to occur in June since January 2021.
In the three months leading up to June, April saw significant growth due to Easter (+12.8 per cent y/y) which was followed by a modest increase in May (+2.5 per cent y/y), before the decline in June (-3.5 per cent y/y).
This decline was widespread and experienced by all states and territories in June. The only industries to show positive growth were healthcare, public administration and education training.
According to the XBSI update, wages growth was slightly below the long-term average of 3 per cent y/y, measuring at 2.9 per cent y/y.
“This indicates that real wages for small business employees continue to lag behind inflation (around 4.0 per cent y/y), and that small businesses are unable to keep pace with wage rises offered by larger businesses,” Xero said.
The hospitality industry continues to offer the largest wage increases (3.6 per cent y/y), while South Australia and Tasmania are the leading regions for wages growth.
The XSBI highlighted small business payment times improved in the June quarter, which can be attributed to businesses settling accounts for the end of the financial year.
Small businesses waited an average of 21.3 days to be paid, demonstrating a slight decrease from 22.5 days in the March quarter.
This was followed by late payments averaging 5.8 days, compared to an average of 6.4 days in March.
Xero sales director Theo Konstantas said the XSBI data reflects how small businesses continue to “demonstrate resilience.”
“We encourage small businesses to know their numbers and work closely with their advisors to find ways to improve productivity,” Konstantas said.
“With the stage three income tax cuts set to boost disposable income for millions of Australians this financial year, we hope consumers will use some of this money to support their favourite small business, driving sales performance in the coming months.”
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