29/10/2021 - Australian small business jobs decline in September for the first time in 2021 new Xero data reveals

MEDIA RELEASE

Australian small business jobs decline in September for the first time in

2021, new Xero data reveals

Xero Small Business Index falls seven points as the journey out of lockdowns for the

small business economy begins

Melbourne - 29 October, 2021 -Xero, the global small business platform, today released new data on the health of Australia's small business economy in September 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 and is part of the Xero Small Business Insights program.

The Index fell to 86 points in September, recording a decline for the third consecutive month. The Index continued its trajectory below 100, revealing small business performance in September was again below average across Australia. The decline in the Index was largely driven by small business jobs which fell 0.9% year-on-year (y/y) in September, the first time growth has dipped into negative territory this year. Sales growth remained solid in September and once again sofened the impact of weaker jobs.

Throughout September, stay-at-home orders continued for Greater Sydney, Metropolitan Melbourne and the ACT. For parts of regional NSW, restrictions were lifed on 11th September, while in regional Victoria, Ballarat (15-22 September), Geelong and the Surf Coast (19-26 September) all moved to lockdown restrictions during the month.

Joseph Lyons, Managing Director Australia and Asia, Xero said "In September, we were witnessing a tale of two economies. The areas in lockdown saw jobs growth decline and sales stagnate, while states like Queensland and Western Australia thrived without restrictions.

October 22nd marked the first time in more than three months that the whole country was free from lockdown restrictions. Businesses in NSW, the ACT and Victoria are reopening and setting upon their journey to recovery, and they will need our support. Historical Xero Small Business Insights data shows the longer restrictions are in place, the longer it takes for small businesses to bounce back."

Solid sales growth continues

Nationally, sales in small businesses - adjusted using annualised two-year growth - rose 6.6% year-on-year (y/y) in September. This is in line with the August result of 6.7% y/y and indicates sales growth continues to hold up, despite the lockdowns in major states.

The national figures masked significant diferences between the states. Victoria recorded the weakest results, contracting to 3.9% y/y following growth of 7.2% y/y in August. In contrast, Western Australia (13.4% y/y) and Queensland (10.4% y/y) delivered solid sales growth, while NSW proved relatively resilient, delivering sales growth of 5.7% y/y in September compared to 3.2% y/y in August.

The hospitality and arts and recreation sectors were the only two industries to record negative sales growth in September. Hospitality sales fell by 9.2% y/y and arts and recreation sales fell by 8.0% y/y.

Jobs growth enters negative territory

Nationally, small business jobs - adjusted using annualised two-year growth - fell 0.9% year-on-year (y/y) in September. This marks the first time this year that jobs have fallen and eliminates most of the gains of late 2020 and early 2021.

Falling jobs across lockdown states extended from just NSW in August to include the ACT and Victoria in September and had a significant impact on national jobs growth. The ACT once again experienced the sharpest slowdown, jobs falling 6.5% y/y. This follows a drop from +6.1% in July to +3.2% y/y in August and reveals the impact of a prolonged lockdown.

Small business jobs in NSW fell 4.0% y/y and Victoria recorded a fall of 2.5% y/y. In contrast, all of the open states recorded positive growth with Western Australia (+5.6% y/y) and Queensland (+2.9% y/y) leading the way.

Louise Southall, Xero Economist, said: "As we saw in August, 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% y/y."

Time to be paid stabilises

The time it took for small businesses to be paid by customers fell by 0.1 days to 23.6 days in September. This is a small improvement on August, when the metric reached its highest since September 2020.

The late payments measure, which tracks the average number of days that invoices are paid late, improved to 6.6 days, down from 7.1 days in August, meaning businesses are on average being paid just under a week late.

Wages growth unchanged

Wages in small businesses, as measured by average employee hourly earnings, rose 2.5% year-on-year. This is consistent with both July and August's 2.5% year on year rise but it is still down on the pre-pandemic pace of growth of around 3% y/y.

Impact of easing restrictions yet to be seen

As restrictions have eased across NSW, the ACT and Victoria in October, the metrics to be released in November will show an initial indication of how the economy will respond.

"While we won't know the full extent of the post-lockdown bounce back for a few months, it's 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," added Lyons.

To download the full September results, including industry and regional breakdowns, go to the website.

ENDS

Media Contact

Xero Australia

Jessica Brophy

[phone] [e-mail]

About Xero

Xerois a cloud-based accounting sofware platform for small businesses with over 2.7 million subscribers globally. Through Xero, small business owners and their advisors have access to real-time financial data any time, anywhere and on any device. Xero ofers an ecosystem of over 1,000 third-party apps and 300 plus connections to banks and other financial partners. In 2020 and 2021, Xero was included in the Bloomberg Gender-Equality Index and in 2020, Xero was recognised by IDC MarketScapeas a leader in its worldwide SaaS and cloud-enabled small business finance and accounting applications vendor assessment.

About Accenture

Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialised skills across more than 40 industries and all business functions -

underpinned by the world's largest delivery network - Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders.

Note to editors:

All growth rates quoted in this release are annualised two-year growth to adjust for the base efects due to the low pandemic-impacted results in 2020.

The Xero Small Business Index is unweighted and comprised of the following four metrics:

• Sales - captures a core measure of small business health and a measure of the overall economic activity in the small business economy.
• Time to be paid - captures how long businesses are waiting to be paid, providing insight on the financial health of their customers and small business cash flow.
• Jobs - captures if small businesses are growing and how small business is impacting on the broader economy and community.
• Wages - captures how benefits from small business performance are translating to employees-benefits flowing to the broader small business economy.

These four metrics were selected because they encompass the operating state of the small business (sales and time to be paid) and the contribution small businesses make to the community (jobs and wages).