Small businesses experiencing strong sales growth

multiple, growth, sustainability

New data from the latest Xero Small Business Index report revelas that the index rose nine points in March 2022 to 118 points, indicating strong sales growth.

This figure is the highest the index has reached since the Delta wave of COVID-19 hit Australia in July 2021. Xero says that it is a sign of continued momentum following the easing of lockdowns last year.

“The latest data gives us a glimpse into the new normalcy for small businesses – and it’s a far healthier reality,” Joseph Lyons, Managing Director Australia and Asia at Xero, said. “While many are still struggling to either find staff or schedule around isolation periods, sales growth continues to be strong across the board. As we make headway into the last quarter of the financial year, this shows promising outcomes for even those industries that have been slower to recover.

“With travel – both domestic and international – very much back on the agenda and restrictions continuing to ease, we hope to see more small businesses find their feet and these figures continue to rise,” Lyons added.

The report shows that sectors that could work from home and weren’t as impacted by COVID-related isolation requirements had some of the highest sales growth in March, with administrative services up 18.7 per cent y/y and professional services up +12.3 per cent y/y. Manufacturing (+13.0 per cent) and construction (+10.9 per cent y/y) also felt this boost.

“We’re seeing how staff shortages have taken a toll on small business growth,” Louise Southall, Xero Economist, said. “As international borders reopen, not only will we see more staff available, but a new pool of potential customers that will engage with the economy and allow businesses to open up even further and thrive.”

Despite the Index increase, jobs fell 1.0 per cent y/y, continuing the weakening trend of the last seven months. The best performing industries for jobs in March were administration, recording a rise of 6.7 per cent y/y, followed by professional services (+2.7 per cent y/y). Real estate (+1.2 per cent y/y) and information media and telecommunications (+0.7 per cent y/y) also recorded positive growth. Hospitality was the weakest sector, (down 5.2 per cent y/y) while agriculture and wholesale trade both posted job declines of 4.0 per cent y/y.

However, small-business wages in Australia are growing slightly faster than they were a year ago (3.2 per cent y/y March 2022 versus 2.9 per cent y/y March 2021), reflecting tighter labour markets and a lack of international talent. However, small business wages are not growing as fast as in other comparable markets like New Zealand (4.3 per cent y/y in March 2022) or the United Kingdom (4.2 per cent y/y).

“While we’re seeing a lack of wage growth in small businesses, it’s not limited to that sector – it’s an economy-wide policy challenge that we’re seeing reflected in national level private sector data, too,” Southall said. “Hopefully as we see the economy continue to recover over the next few months, we’ll see wage numbers lift, too.”