Xero, a leading global platform for small businesses, released its latest Xero Small Business Insights (XSBI) update, revealing positive news for Australian small businesses in the first quarter of 2024. This data indicates a resilient small business sector, bouncing back from a soft December 2023 with robust growth in jobs and wages.
Key Findings at a Glance:
- Sales growth averaged 3.5% year-on-year (y/y) for the March quarter, a significant improvement from the 5.6% y/y recorded in December 2023.
- Wages growth averaged 3.2% y/y in the March quarter, slightly higher than the 3.0% y/y in the December quarter.
- Jobs growth averaged 3.7% y/y in the March quarter, exceeding the 3.5% y/y in December 2023.
- On average, small businesses waited 22.6 days to be paid in the March quarter, a slight improvement from the 22.7 days in December 2023.
“The improvement from a challenging end to last year is a welcome sign,” said Louise Southall, Xero Economist. “The Xero Small Business Index dropped below 100 points in December, so it’s encouraging to see stronger growth in jobs, wages, and sales – three critical success factors – during the first quarter.”
Xero Small Business Index Rebounds
The Xero Small Business Index averaged 120 points in the March quarter, reflecting a slight increase from the December quarter result (115 points). This positive trend was driven by a significant jump in February (127 pts) and March (134 pts) compared to the December (89 pts) and January (98 pts) readings.
Sales Growth Encouraging Despite March Dip
Sales growth rebounded in January (+6.1% y/y) and February (+6.9% y/y) after a weak December (+1.9% y/y), suggesting improving conditions for small businesses. However, a drop in March (-2.4% y/y) can likely be attributed to the earlier timing of the Good Friday public holiday, when most businesses were closed.
The healthcare (+13.5% y/y) and real estate (+10.0% y/y) sectors were the top performers in January and February, being the only industries to achieve double-digit growth. The ACT recorded the strongest sales growth in the first two months (+8.6% y/y), while Tasmania (+4.3% y/y) saw the softest gains.
Jobs Growth Sees Largest Rise Since Late 2022
Small business hiring continued in the March quarter (+3.7% y/y) and surpassed the average jobs growth in 2023 and the long-term average for this data series (3.0% y/y). Jobs growth was particularly strong in March (+4.3% y/y), marking the largest rise since October 2022. This suggests increased confidence among small businesses in hiring new staff.
The data reveals variations in jobs growth across industries and states. The healthcare sector (+9.2% y/y) and Western Australia (+5.8% y/y) led the gains, while the hospitality sector (-1.4% y/y) experienced a third consecutive quarter of declining jobs. ACT (+1.4% y/y) and Tasmania (+1.3% y/y) had the softest jobs growth.
Wages Growth Picks Up, But Not Keeping Pace with Inflation
Wages saw a slight increase from the December quarter, reaching just above the long-term average for this data series (+3.0% y/y). However, the pace of growth remains below inflation, and small business pay rises are lower than the national average indicated by the latest Wage Price Index rise (+4.2% y/y). This suggests that real wages for small business staff are not keeping up with inflation.
South Australia (+3.7% y/y) and Tasmania (+3.5% y/y) continue to lead in wages growth. The hospitality sector (+4.0% y/y) maintains its position as the industry offering the largest wage increases.
Payment Times Remain Steady
The time it takes for small businesses to receive payment and late payment measures remained consistent throughout the first quarter, mirroring the trend observed in 2023. On average, small businesses waited 22.6 days to be paid in the March quarter (down from 22.7
