Xero, the global small business platform, has released a new Xero Small Business Insights (XSBI) report highlighting significant variations in labour productivity across Australian industries and regions.
This report, titled “Small business productivity: Industry and regional trends,” follows the initial XSBI productivity report published in April 2024, which identified a nationwide decline in small business productivity throughout 2023.
Key Findings:
- Wholesale trade emerged as the most productive industry in 2023 (A$214.20/hour), with hospitality trailing behind at A$40.20/hour.
- Despite a national productivity decline, ten sectors, including manufacturing, agriculture, and construction, surpassed the national average (A$100.30).
- Western Australia boasted the highest state productivity (A$102.50/hour), exceeding Tasmania (A$89.00/hour), the least productive state, by 15%.
Importance of Technology and Skills Development
The report emphasizes the significance of technology adoption and skills investment for boosting productivity. Notably, agriculture and construction, traditionally viewed as non-tech-driven sectors, ranked among Australia’s most productive industries between 2017 and 2023. This suggests that agricultural operators have embraced innovation, achieving a productivity rate of A$120.60/hour in 2023. Construction businesses, with a focus on skill development, recorded A$117.00/hour, ranking as the fourth most productive industry.
Conversely, the hospitality industry displayed one of the lowest productivity levels at A$40.20/hour in 2023. However, Xero’s data indicates a shift towards technology adoption to address ongoing staff shortages and improve productivity.
Productivity Decline Across All Regions
The disparity in labour productivity between states and territories was less pronounced compared to industry variations in 2023. Victoria (A$101.90/hr) and New South Wales (A$101.10/hr) trailed only marginally behind Western Australia, the leader. Interestingly, all regions covered in the XSBI data experienced a decline in productivity compared to 2022. Queensland witnessed the smallest decline (-2.3%), slightly higher than the national average (-2.5%). Western Australia, surprisingly, experienced the most significant decline (-4.0%).
Strategies for Boosting Productivity
Xero offers a guide outlining practical strategies for enhancing productivity, including investments in improved tools, process refinement, employee upskilling, and leveraging entrepreneurial skills.
Impact and Recommendations
Labour productivity serves as a crucial indicator of small business success. The report highlights the need for struggling industries and regions to adopt digitalization for greater operational efficiency, particularly in service-based sectors like hospitality and healthcare, which currently fall below the national average.
Looking ahead, sustained productivity growth holds immense significance for small businesses and the overall economy. The report concludes by urging the government to implement well-designed policies with broad applicability across locations and industries.
