Xero’s Small Business Index rose three points in February 2022 to 102 points, a result largely driven by sales, which rose 15.2% year-on-year, and partially offset by continued weakness in jobs growth, which fell 1.1% in February.

This combination of results overall means the performance of small businesses is making a gradual recovery, and a slow return to above the long-term average.

The Index’s return to long-term above average (100 points) is a positive sign for small businesses.

A recent Xero survey revealed that while almost two-thirds (32%) of small businesses still see Covid-19 as a threat to their business this year, they were optimistic that conditions will be better than previous years.

Consistent with positive sales growth in the Index data, over half of the small businesses surveyed (53%) said they were performing about the same as they were before the pandemic.

“February’s Xero Small Business Index results are cause for cautious optimism that the sector is on track for a gradual recovery. That said, small businesses are still navigating the ongoing impacts of the pandemic and continued labour shortages, while also facing a fresh set of challenges in 2022,” Xero managing director for Australia and Asia, Joseph Lyons said.

“Those in southeast Queensland and northern New South Wales are dealing with the aftermath of the floods, while more broadly we’re seeing the effects of inflation and rising costs. Time and again, small businesses have proved their resilience, but they’ll need to remain top of mind for political parties as we edge closer to an election. The health of the small business sector is key to our sustained economic growth.”