Australian small business jobs and sales on the rise
Xero, the global small business platform, released new data on the health of Australia’s small business economy in May 2021 from the Xero Small Business Index. Based on aggregated and anonymised transactions from hundreds of thousands of small businesses, the Index is produced in partnership with Accenture as part of the Xero Small Business Insights program.
Index hits all time high
The Index rose seven points during May 2021 to 132 points, reaching its highest level since records began in January 2017. It also represents the fifth consecutive month of overall above average performance by small businesses.
The rise in May was largely underpinned by another strong month of job gains, increase in wages, and time to be paid hitting new lows.
Jobs growth remains above 5% for the second consecutive month
Small business jobs, using annualised two-year growth to account for the low May 2020 reading, rose 5.7% year-on-year (y/y) in May 2021. This marks the second consecutive month where employment growth has been above 5% y/y, highlighting the strong contribution small businesses are making to Australia’s jobs recovery in 2021.
All industries tracked by Xero Small Business Insights recorded positive jobs growth (when adjusted for the low 2020 readings), including the hospitality and arts and recreation industries which recorded an increase of 3.3% and 4.5% y/y respectively.
Healthcare and retail lead strong small business sales
Sales in small businesses, adjusted using annualised two-year growth, increased 6.3% y/y. This is slightly down compared to the strong sales rates of the past two months, with March and April recording 11.3% (unadjusted) and 8% y/y growth (adjusted), respectively.
Using annualised two-year growth, healthcare (+12.8%) and retail trade (+10.7%) were the strongest performing industries for May 2021, y/y. Hospitality sales rose 8% y/y as consumers became more confident about spending and going out. Other pandemic impacted industries continue to remain soft, with arts and recreation sales falling 1.4% y/y.
“Xero's data continues to highlight the strong contribution small businesses are making to Australia’s economic recovery. It's pleasing that some of the hardest hit businesses, like those in hospitality and retail, are now adding to this recovery as we begin to see an uptick in jobs and sales across these industries. The figures are a stark comparison to the same period last year”, said Trent Innes, Managing Director Australia and Asia, Xero.
Time to be paid hits new low
The time it took for small businesses to be paid fell in May 2021, by 0.5 days to 22.9 days. This is only the second time this measure has fallen below 23 days since Xero Small Business Insights began in January 2017.
There was a similar decline in the late payment measure, which fell 0.4 days to 6.3 days. This is 3.6 days faster than the peak of the pandemic, but it still means small businesses are being paid almost a week late on average.
Small business wage growth stabilises
Wages in small businesses, as measured by average employee hourly earnings, rose 3.6% y/y. Adjusting for the effect of the low result in May 2020, the wage increase was 2.7% y/y which is slightly stronger than April (2.4%). The construction industry experienced the strongest wages growth, up 3.4% y/y.
Impact of Victoria’s May-June lockdown yet to be seen
The lockdown in Victoria did not start until May 27, meaning there was limited time to impact the monthly data sets measured by the Xero Small Business Insights program.
Before adjusting for the base effect, Victorian sales growth was only slightly slower, at 27% y/y, than both New South Wales (28.2%) and Queensland (28.7%).
“The most recent Victorian lockdown has been challenging for our small business sector, with some industries having to shut their doors once more due to the restrictions. While we may see a drop in Victorian small business jobs and sales in next month’s Index update, previous Xero Small Business Insights analysis has shown how resilient our small business community is. We’ll be looking to our June 2021 metrics to see the full extent of the lockdown on Victorian small businesses,” said Innes.
To read the full May results, including to download the data, go to here.