The Xero Small Business Index was 93 points in January 2023, down 26 points since November, driven by a slowdown across all four sub-metrics.
Sales grew 7.2% year-on-year, the same result as December, but were down from 11.1% in November. Jobs growth slowed to just 1.6%, down from 2.8% 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% in January, down from a peak of 4.7% in September 2022 and just below the 3% long-run average.
Xero Australia country manager, Will Buckley 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.”
Xero economist, Louise Southall commented, “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.
“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.”
Across industries, sales growth was led by arts and recreation (17.1%) and hospitality (15.7%). The weakest two industries in January were rental, hiring and real estate (down 2.5%) and retail sales (up 0.6%).
All states recorded positive sales growth but only South Australia and Victoria recorded stronger sales growth in January than in December of 9.8% and 7.5% respectively. The softest sales result was in Tasmania (3.3%).