The Australian Xero Small Business Index registered 93 points in January 2023, falling 26 points since November 2022. The index is based on anonymised and aggregated transactions from the small business sector.
The index is estimated to have dropped due to a slowdown in four sub-metrics, including wages, jobs and sales. Wages grew by just 2.9% year-on-year in January, dropping from 4.7% growth year-on-year in September 2022. The slowest growth rate was in the healthcare sector where wages grew by just 2.2% year-on-year. The real estate, rental, and hiring sectors also grew by just 2.4% while hospitality wages rose by 4.2%.
Job growth slowed down to 1.6% year-on-year in January, a reduction from 2.8% recorded year-on-year for December and the smallest increase since May 2022. The education sector saw the largest decline in job growth at -4% year-on-year, with construction close behind with a -0.3% growth rate year-on-year. This is the first time the construction sector has experienced a decline in job growth since May 2022.
Sales rose by just 7.2% year on year in January. A similar result to December figures, but less than the 11.2% growth year-on-year recorded in November. The report found that though nominal sales had grown, the volume of goods sold was likely to have fallen. The highest sales growth occurred in the arts and recreation sector which rose by 17.1%, while hospitality sales rose by 15.7%.
According to Xero Australia’s Country Manager, Will Buckley, these results indicate that cost of living pressures are now being more strongly felt by the small business sector. As people have less disposable income to spend, it has led to a reduction in sales, making small businesses less able to keep up with wage growth and attract employees.
There is also concern that waiting times for payment are back to early pandemic levels. Buckley noted that the time-to-be-paid data could indicate an emerging cash flow squeeze as small businesses are now waiting on average 23.8 days, up from 23.1 days reported in the 2021-22 period. Late payments have also risen to 7.7 days, the highest level seen since July 2020.
Some of Xero’s results were reflected in the Australian Bureau of Statistics (ABS) seasonally adjusted Wage price index which rose by 3.3% over the year till December. Much of the growth was attributed to a rise in public sector wages. According to the report, the accommodation and food services sector recorded the highest growth year-on-year of 3.5%.
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