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New data from Xero has revealed the increasingly poor health of Australian small businesses.
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Small-business jobs enter negative territory
02 November 2021
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10 minute read
The Xero Small business Index fell to just 86 points in September – marking a third consecutive month of decline.
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Based on aggregated and anonymised transactions from hundreds of thousands of small businesses, the index continued its dip below 100 – the number considered “average”.
According to Xero, the latest decline was “largely driven by small business jobs which fell 0.9 per cent year-on-year in September”.
This marks the first time this year that jobs have fallen and eliminated most of the previous gains made across late 2020 and early 2021.
It was the ACT that saw the greatest slowdown – jobs have fallen 6.5 per cent year-on-year in the territory.
In NSW, small-business jobs were down 4.0 per cent year-on-year, while Victoria saw falls of just 2.5 per cent year-on-year.
According to Xero economist Louise Southall, “the decline in jobs growth is not consistent across industries and states.”
“Small businesses in hospitality and arts and recreation continue to be the most impacted by lockdowns. Following a number of months of solid growth we even saw jobs in the retail sector down 0.7 per cent year-on-year,” she continued.
While it’s the first time growth has entered negative territory in 2021, it was buffered by solid sales growth over the month.
Across the country, sales in small business – adjusted using annualised two-year growth – rose 6.6 per cent year-on-year in September, adding to August’s 6.7 per cent year-on-year achievement.
Xero stated that this indicates sales growth is continuing to hold up in spite of major lockdowns.
Even so – each of the states reported quite “significant differences”.
Victoria’s results were understandably the weakest – contracting to 3.9 per cent year-on-year, after previously reporting growth of 7.2 per cent in August.
Across Western Australia, 13.4 per cent growth year-on-year was reported, ahead of Queensland’s 10.4 per cent gain in growth for the year.
Even NSW saw an improvement, in spite of continuing lockdowns, having delivered sales growth of 5.7 per cent year-on-year to September, when compared to 3.2 per cent it recorded in August.
According to Xero, it was hospitality and arts and recreation that again took the brunt – being the only two industries to record negative sales growth in September.
Hospitality sales were down by 9.2 per cent year-on-year, while arts and recreation sales fared barely better – down 8.0 per cent year-on-year.
Joseph Lyons, Xero’s managing director Australia and Asia, said the latest analysis shows “a tale of two economies” across September.
“The areas in lockdown saw jobs growth decline and sales stagnate, while states like Queensland and Western Australia thrived without restrictions,” Mr Lyons said.
While lockdowns are no longer in place – the first time in more than three months that Australia has been lockdown-free – the struggles for small businesses are set to stick around.
“Historical Xero Small Business Insights data shows the longer restrictions are in place, the longer it takes for small businesses to bounce back,” Mr Lyons advised.
“Businesses in NSW, the ACT and Victoria are reopening and setting upon their journey to recovery, and they will need our support.”
Mr Lyons acknowledged that we won’t know the full extent of the post-lockdown bounce back for a few months yet.
But, he did state that it has been encouraging to see people in locked down areas celebrate the easing of restrictions by backing small businesses.
“Whether dining at a local restaurant, queuing to get a long-awaited haircut or booking tickets for a comedy show, communities are showing their support for industries that bore the brunt of the pandemic,” he stated.
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