According to a new Xero survey, the small business sector is burdened by record wage increases that are occurring at the same time the industry is also contending with reduced sales growth driven by inflation. Following huge increases in sales figures, sales growth has slowed down to 5.8%, with the education, arts and recreation, and telecommunications sectors being the worst hit.
The Xero Small Business Index rose to 122 points, reflecting job growth and time to be paid. Xero managing director for Australia and Asia, Joseph Lyons, said that the wage increases were indicative of the tight labour market and though they were a sign of the health of the sector, small businesses were still facing increasing costs due to inflation. He appealed to the incoming government to find ways to reduce this financial burden on the sector.
Xero economist, Louise Southall, added that inflation and rising interest rates were having a ‘pincer’ effect on small businesses. Though higher wages were attracting talent, these businesses are also struggling with growing material and loan costs, forcing them to increase the pricing of their products and services. Southall noted that it was difficult to increase pricing when potential customers were also faced with their own cost of living crisis, compelling them to spend less on discretionary expenses like recreation, education, and arts. Businesses that rely on discretionary spending are now faced with the reality of shrinking profit margins.
Although Australia’s unemployment rate has hit a 50-year low of 3.9%, job growth was also found to be lagging behind wage increases, with figures from April falling by 1.1% year-on-year. This is following further declines of 1.3% recorded in March.
Australian Chamber of Commerce and Industry CEO, Andrew McKellar, has highlighted the increased shortage in labour and skill shortage across various industries and has asked the federal government to give the issue first priority. Similar sentiments have been shared by the Australian Retailers Association who say the government should prioritise the labour and skills shortage alongside advancing social and economic outcomes.
Council of Small Business Organisation Australia (COSBOA) CEO, Alexi Boyd, is also urging the government to address worker shortages, besides other promises from the Coalition’s budget including lower merchant fees, improved regulation on late payments, regulatory reforms, and better preparedness for natural disasters. She noted that the small business sector harboured expectations that the new government would help level the playing field between big and small businesses, allowing them to recover the ground they lost during the pandemic.
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