A special report prepared by Xero Small Business Insights (XSBI) has uncovered notable disparities in small business labour productivity across key Australian industries and regions.
The Small business productivity: Industry and regional trends report reveals that the labour productivity decline is notable across all industries, although 10 sectors were found to have surpassed the national productivity average which is pegged at A$100.30.
“Xeroʼs new productivity data offers timely insights into small business productivity trends, due to its focus on small businesses, speed to market, monthly measurement cadence, and objective, anonymised, aggregated data,” Louise Southall, Xero Economist, commented. “This is in contrast to other productivity data which is generally broader, slower to be released and covers a longer time period. What the report reveals is differences in small business labour productivity, varying significantly across industries and states.”
The most productive Australian industry in 2023 was wholesale trade (A$214.20/hour). And, despite being traditional industries, agriculture and construction were two of Australia’s most productive industries between 2017 and 2023 and among the sectors that surpassed the national productivity average. The research surmised that the agriculture operators seemed to have embraced innovation, achieving a productivity rate of A$120.60/hour in 2023, while construction businesses was noted to be prioritising skill development, thus recording A$117.00/hour, the fourth most productive industry.
Conversely, hospitality had one of the lowest levels of productivity at A$40.20/hour in 2023, though Xeroʼs data suggests the industry is embracing technology to lift productivity in response to ongoing staff shortages.
“The hospitality industry has been able to lift its productivity post-pandemic, and itʼs promising to see some operators turning to other solutions to boost efficiencies, such as QR codes or online ordering,” Southall said.
The variation in labour productivity across states and the Australian Capital Territory was smaller than it was across the industries in 2023, though all regions tracked in the research experienced a decline in producitivity. Victoria (A$101.90/hr) and New South Wales (A$101.10/hr) are only marginally behind the most productive state, Western Australia (A$102.50/hour)) while Queensland experienced the smallest decline in productivity (-2.3 per cent), a few percentage points higher than the average national decline (-2.5 per cent). Interestingly, the largest decline was seen in Western Australia (-4.0 per cent).
“The decline in productivity in Western Australia over 2023 is surprising and most likely just a small pull-back in a state that has outperformed other areas of Australia in recent years,” Southall pointed out. “Western Australia is one of only two states that had higher productivity post-pandemic on average over 2022 and 2023 than it did in the three years prior to the pandemic.”
Anthony Drury, Managing Director of Xero in ANZ stressed that labour productivity is an important indicator of small-business success, highlighting the disparity in performance across the states and territories.
“We encourage small businesses to look at ways to digitalise to drive greater efficiencies in their day-to-day operations,” Drury said. “This is particularly crucial for service-based businesses like hospitality and healthcare, which are currently tracking below the national productivity average.
“Looking ahead, sustained productivity growth is critical for small businesses and the broader economy, and the government must introduce smarter policies that have widespread application for any location or industry,” Drury concluded.
