The Australian Xero Small Business Index rose 9 points in March 2022 to 118 points, its highest since June 2021.
The global small-business platform released its latest data on the health of Australia’s small-business economy during March and while the results were still lower than in March 2021, at 130 points, it is the highest the index has been since the delta wave of COVID-19 hit Australia in July 2021.
This is a positive marker for the health of the small-business economy and indicated that, across the board, it is making headway in a return to normality.
Joseph Lyons, managing director Australia and Asia, Xero, said the latest data gives a glimpse into the new normalcy for small businesses – and it’s a far healthier reality.
“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,” he said.
“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.”
The data revealed that sales were up 10.7 per cent y/y in March, a slowdown from the 16.6 per cent y/y February result; and that jobs fell 1.0 per cent y/y, down from +0.1 per cent y/y in February, continuing the weakening trend of the last seven months.
The best performing industries for jobs in March were those that could easily work from home – administration jobs were the strongest, recording a rise of 6.7 per cent y/y followed by professional services (+2.7 per cent y/y).
The average time small businesses had to wait to be paid by customers fell 0.2 days in March, to 23.2 days. Late payments were also marginally down at 6.6 days, from 6.9 days in February.
The best performing sub-metric in March was time to be paid, which fell 0.2 days to 23.2 days. The weakest sub-metric was jobs growth, which fell 1.0 per cent y/y in March, after just a 0.1 per cent y/y rise in February.
The report stated sales were up 10.7 per cent year-on-year (y/y) in March, a slowdown from the 16.6 per cent y/y February result but a sign of continued momentum following the easing of lockdowns last year. ACT (+14.3 per cent y/y) had the strongest growth, followed by Queensland (+13.1 per cent y/y) and Victoria (+12.1 per cent y/y). Tasmania, however, was the outlier, recording weak sales growth of +1.3 per cent y/y, well down from February’s result of 14.4 per cent y/y.
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. 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,” said Louise Southall, Xero economist.
Jobs growth remains soft as illness, isolation and skills shortages continued to take their toll although the index increased in the month of March, jobs fell 1.0 per cent y/y, down from +0.1 per cent y/y in February, continuing the weakening trend of the last seven months. Negative jobs growth was prevalent across all Australian states, as COVID-19 illness and isolation, combined with skills shortages in some sectors, kept staff out of the workplace.
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.
The continuing trend of stagnating wages growth is an anomaly for the Australian market. 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 UK (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,” said Ms Southall. “Hopefully as we see the economy continue to recover over the next few months, we’ll see wage numbers lift too.”
