The latest edition of the Xero Small Business Index sees the Index average at 120 points in the first five months of the year, well above the 112-point average of the last three months of 2022.
While sales, jobs, and wages growth have slowed in the first half of 2023, the Index highlights that overall conditions remain better than the long-term average, an indication that Australian small businesses have been resilient to recent economic challenges.
In detail, sales growth slowed to 8.0 per cent year-on-year (y/y) in the three months to June, a decrease from an average of 14.4 per cent y/y over the whole of 2022. However, this figure was still above the long-term 7.8 per cent y/y average for this metric. It is also worth noting that small businesses are still selling more goods and services than they were a year ago, as the rise in sales was larger than the rise in the CPI in the June quarter.
Wages growth also eased in the June quarter, growing 3.1 per cent y/y, compared to 3.6 per cent y/y in 2022. Jobs growth fared worse in the index. While it rose to 2.3 per cent y/y in the June quarter, it was below the 3.4 per cent y/y average recorded in 2022.
“(The) data highlights that the combination of persistent inflation and ongoing high-interest rates are hitting household budgets and not leaving much room for extra spending in small businesses,” Louise Southall, Xero Economist, said. “But, on a more positive note, small businesses are still selling more goods and services than they were a year ago, and owners are likely to welcome the news, at least in the short-term, that wage pressures have eased.”
June was also marked by faster than usual payment times as the financial year was coming to an end, which affected the Index’s figures on payment times. Overall though, payment times were stable during the first half of the year. Small businesses waited on average 23 days to be paid in the first five months of 2023, and payments were made on average 6.8 days late in this period. Still, payment times remain a pain point for small businesses and has a detrimental impact, especially for those that might already be experiencing cashflow stress due to inflation and other challenges.
“We know it has been a difficult start to the year for many Australian small businesses, but itʼs promising to see there are positive signs, such as easing wage pressures, in the latest data from Xeroʼs Small Business Insights,” Will Buckley, Country Manager at Xero Australia, said. “Small businesses have shown resilience in the face of interest rate rises and high inflation but while household budgets are tight at the moment, we encourage Australians to continue supporting small businesses in their communities in whatever way they can. Whether thatʼs shopping locally, spreading the word online or making an effort to check in with the small business owners in your area, we can all play a part in ensuring they can continue to thrive.”
