Xero: wage pressures easing for Australian small business

Xero has released its latest data on the health of Australia’s small business economy from the Xero Small Business Index. The New Zealand-based global business platform provides cloud based accounting software for small businesses.  Based on aggregated and anonymised transactions from hundreds of thousands of small businesses, the Index is part of the Xero Small Business Insights program.

The Australian Small Business Index was 93 points in January 2023. This is down 26 points since November, driven by a slowdown across all four sub-metrics. Sales grew 7.2 percent year-on- year (y/y), the same result as December, but down from 11.1 percent y/y in November. Jobs growth slowed to just 1.6 percent y/y, down from 2.8 percent y/y in December. The time to be paid metric rose 0.6 days to 23.8 days, which is the longest time since September 2020. Wages rose just 2.9 percent y/y in January, down from a peak of 4.7 percent y/y in September 2022 and just below the long-run average for this series (+3.0 percent y/y).

Will Buckley, Country Manager, Xero Australia, said: “This latest data from our Index shows that Australian small businesses are beginning to feel the impact of cost of living pressures on their customers. We are seeing a slowdown in sales that will be putting pressure on small businesses who are recovering from a demanding few years. This then flows through to their capacity to increase wages and attract staff.”

Wages rose 2.9 percent y/y in January – the smallest rise since December 2021, and the fourth consecutive month of slowing growth.

“Given Australia’ s current low unemployment rate, there has understandably been a lot of concern around how this will impact wages growth and, in turn, inflation. However, our data suggests that the wage increases being paid by small businesses are not as large as they were as recently as September last year,” says Louise Southall, Xero Economist. “While this may provide some short term relief for small business owners who struggled with balancing above average wage increases and rising costs during 2022, it may result in consumers having less disposable income to feed back into small businesses in the medium term.”

Xero’s data comes as the federal government this week announced that grants of between $10,000 and $25,000 will be available to small and medium businesses to fund energy-saving measures to further support small business and sustainability efforts. NRA Chief Executive Officer Greg Griffith welcomed the initiative, and urged the retail community to take advantage of the funding. “Energy is one of the biggest overheads for many businesses,” Mr Griffith said. “All retailers know the costs of running that equipment have increased significantly in recent years, and these are costs that need to be passed on to consumers. It’s pleasing to see the Federal Government recognise that increased cost burden, particularly at a time when consumers are becoming increasingly cautious and price sensitive.
“We know that retailers are already looking closely at their energy use and looking for ways to lower their costs. This is a very good opportunity and we encourage all eligible businesses to apply.”

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