The latest figures in Xero’s Small Business Index show the index fell 40 points in July to 111 points and now sits around the 2021 average, reflecting the volatility during the end of the financial year and sales growth slowing in July to 7.5 per cent year-on-year (y/y),
On the other hand, jobs rose 4.1 per cent y/y in July – the largest rise since August 2021 and above the long-term average of 3.0 per cent y/y for the Xero Small Business Index series, meaning jobs growth has now been positive for three consecutive months.
“Small businesses remained resilient in the face of inflation and other supply chain challenges according to the July index,” Joseph Lyons, Managing Director Australia and Asia for Xero, said. “In fact, we’ve seen the strongest jobs growth in almost a year, even across industries like hospitality and agriculture, which have recently struggled to find talent.
“While inflation is impacting small businesses globally, our data shows that Australian small businesses are faring slightly better compared to those in New Zealand and the United Kingdom in terms of sales,” Lyons added. “While this doesn’t mean it’s smooth sailing for local small businesses – as most can attest to – it’s promising to see an overall above-average result, especially for sectors that have been doing it tough.”
The report also noted that wage growth has been marginally higher, at 3.6 per cent y/y, up from 3.4 per cent y/y in June. But, despite the annual increases in minimum wage (5.2 per cent) and award wages (4.6 per cent) that came into effect on 1 July, it noted that there has not been a material impact on aggregate wage costs.
“July was the first month of the new financial year where the increase in minimum and award wages was in place and we didn’t see a significant effect,” Louise Southall, Economist at Xero, saidf. “We will get more award wage information in October when the award wage rise comes into effect for the hospitality industry.”
The main area of concern in the Index for July is the slowdown of sales growth, which slowed to 7.5 per cent y/y, from 11.4 per cent y/y in June. Many Australians are facing cost of living pressures as prices rise faster than wages, causing a flow of effect when it comes to spending in small businesses across the country.
“When prices are taken into account, using the June quarter Consumer Price Index, it suggests that the volume of sales rose a smaller 1.4 per cent y/y (down from +5.3 per cent y/y in June),” Soutall said. “But this means small businesses still sold more goods and services in July 2022 than they did in July 2021. This is different to the experience of small businesses in other countries like the United Kingdom and New Zealand, where sales, excluding price impacts, have actually declined for June and July.”
