Australia small business sales steady as jobs growth lifts

Small business performance in Australia stabilised in the September quarter, according to Xero's latest Small Business Insights data, with sales growth steady and jobs growth stronger.

Small business sales rose 5.2% year on year in the quarter, down from 7.3% in the June quarter, which had been boosted by a 10.9% increase in April. Over the three months, sales growth was 4.9% in July, 6.4% in August and 4.3% in September.

The figures suggest the market has held up despite pressure from higher fuel prices, inflation, weak wage growth and four cash rate rises this year. Payment times also returned to levels seen earlier in the year after the end-of-financial-year dip in June.

Industry split

Performance varied sharply by sector. Mining recorded the strongest sales growth, at 12.0% year on year, followed by healthcare at 8.1% and construction at 7.9%.

Real estate services were among the weakest sectors, at 1.8%. Other interest-rate-sensitive industries also lagged the national result, including retail trade at 2.4%, hospitality at 2.7% and arts and recreation at 1.2%.

Information, media and telecommunications posted sales growth of 2.4%, suggesting small businesses saw limited benefit from the wave of investment in data centres reflected in broader business investment figures.

State variation

Across the states and territories, Western Australia led sales growth at 7.7% year on year, ahead of Queensland at 5.7%, South Australia at 5.3% and New South Wales at 5.2%. Victoria and the Northern Territory recorded the weakest increases, at 3.8% and 3.7% respectively.

Employment growth improved in the quarter, with small business jobs up 3.9% year on year after a 3.1% increase in the June quarter.

Mining again stood out, with jobs growth of 8.9%. Public administration rose 8.1%, utilities 8.3% and construction 6.7%, all well above the national average.

At the other end of the scale, hospitality recorded job growth of 0.5%, while information, media and telecommunications grew 1.6%.

Western Australia also led employment growth, with jobs up 4.9%, followed by Queensland at 4.3% and the Northern Territory at 4.2%. The ACT lagged at 1.9%.

Wage pressure

Wage growth weakened sharply. Small business wages increased 1.2% year on year in the September quarter, down from 2.3% in the June quarter and about half the long-term average of 2.9%.

Healthcare posted wage growth of 0.4%, education 0.5%, public administration 0.8%, real estate services 0.8%, and information, media and telecommunications 0.8%. Hospitality was the only industry to record wage rises above 2%, at 2.8%.

Payment data pointed to a return to more typical conditions after the June quarter. Small businesses waited an average of 24.3 days to be paid after issuing an invoice, up from 23.5 days the previous quarter. They were paid an average of 6.9 days late, up from 6.3 days.

The report said the broader economic backdrop remained difficult for small firms. While AI-related investment in data centres and associated fit-outs has supported business investment and some parts of construction, the benefits for most small businesses appear limited.

By contrast, higher fuel costs, persistent inflation, subdued wage growth and higher interest rates continue to squeeze household budgets and weigh on demand in consumer-facing sectors.

The Reserve Bank of Australia has also warned that firms are facing cost pressures and are either raising prices or considering doing so, while demand needs to remain subdued for a period to bring inflation back to target.

The result is a mixed picture for small businesses, with hiring improving in parts of the economy but wage growth weak and sector performance increasingly uneven. Western Australia and mining remain standout areas of strength, while sectors more exposed to household spending and borrowing costs continue to lag.