The latest edition of the Xero Small Business Index reveals a rise of six points in September to 127 points.
The increase is largely attributed to a record-high wage growth, strong jobs growth, and somewhat improved payment times. However, these were partially offset by softer sales growth.
“The September data shows a fantastic result for jobs growth across all industries, with this month hitting the first double-digit growth in over a year, paired with the largest wages growth since our Index started,” Will Buckley, Country Manager at Xero Australia, said. “It’s so encouraging to see Australia’s small businesses not only having the confidence in their future to be hiring new staff, but competing with larger organisations in attracting talent by paying higher wages.”
Wages rose 4.6 per cent y/y in September, the largest increase since the series began in January 2017. Across the industries, wages growth was led by construction (+5.6 per cent y/y) and manufacturing (+5.5 per cent y/y), while healthcare and social assistance (+3.4 per cent y/y) continued to see the slowest growth y/y.
“Wages in Australia have been slower to respond to tight labour markets compared to New Zealand and the United Kingdom, however the past two months have seen a noticeable acceleration,” Louise Southall, Economist at Xero, said. “This is a positive sign for small business staff, and suggests the economy is slowly starting to respond to the record low unemployment rates.”
Higher wages is seen as a factor for more people being enticed to work in small businesses, with jobs rising 10.2 per cent y/y in September, the first double digit growth since July 2021. Interestingly, the growth was led by the two sectors that were hardest hit by pandemic restrictions, hospitality (+28.9 per cent y/y) and arts and recreation (+35.4 per cent y/y).
“The jobs growth data is particularly positive for the hospitality and arts and recreation industries, two sectors that were hardest hit from the pandemic, but have demonstrated strong recovery over the last few months,” Buckley said. “Hopefully this will continue as we head into the summer season and as both locals and tourists have the confidence that their plans will no longer be impacted by restrictions.”
Worth noting is the growth for the agricultural sector at +1.5 per cent y/y, the first jobs growth for the sector since August 2021 and a positive sign as overseas workers are returning to Australia.
Sales grew 8.8 per cent y/y in September though at a much slower pace than August’s 20.4 per cent y/y. However, using the CPI for September quarter (7.3 per cent y/y) as a proxy for prices, sales volumes are still rising. Similarly to the jobs data, the two strongest industries were arts and recreation (+39.9 per cent y/y) and hospitality (+36.3 per cent y/y). Finance and insurance (-5.5 per cent y/y) was the only sector to record a drop in sales.
Meanwhile, the average wait time for small businesses to be paid fell 0.5 days in August to 23.2 days. This is in line with the 23-day average recorded in the first eight months of 2022.
