New data shows Australia’s road to economic recovery hit a major bump in July, as small businesses recorded their worst performance since last December in the face of ongoing lockdown restrictions affecting more than half of the Australian population.
Xero on Thursday released the results of its latest small business index, which fell by 41 points to 101 for the month of July, the lowest levels recorded since December 2020, just one month after the sector recorded a four-year high.
While levels around 100 are considered average, the index suggests that Australia’s national reading masks significant differences across the states, whose performances were marred by restrictions in Greater Sydney, impacting some 25 per cent of the Australian population.
The impacts of restrictions in New South Wales and, later, Victoria were revealed most prominently in the form of slowed jobs growth across the sector.
In New South Wales, job growth improved just 0.4 of a percentage point year on year, while Victoria saw a small bump of 2.7 per cent. By contrast, Western Australia recorded a job growth increase of 6.7 per cent.
The sectors to suffer the heaviest blows to jobs growth were the arts and recreation and hospitality industries, which saw year-on-year falls of 3.5 per cent and 3.2 per cent, respectively.
The New South Wales government has since made moves to bolster support for the hospitality and tourism industry, announcing on Wednesday that the state’s JobSaver scheme would be expanded to support larger businesses in both sectors with revenues of up to $1 billion.
Xero managing director in Australia and Asia Joseph Lyons said the rollout of government support packages is critical to small businesses facing sustained uncertainty.
“With lockdown restrictions in August spanning NSW, Victoria, Queensland, the Northern Territory and the ACT, and the threat of the Delta variant not abating, small businesses right across the country are facing continued uncertainty,” Mr Lyons said.
“Government support packages are vital to the ongoing viability of the sector, particularly across hard-hit industries such as arts and recreation, tourism and hospitality. Within communities, we must do everything we can to ensure people in small businesses feel our support.”
Data also showed national small business sales growth took a hit through July, down by 11.2 per cent on June, and up by just 2.9 per cent year on year — the lowest growth rate since January this year.
Slowed sales growth was dragged by NSW — the only state to record a decrease — where sales took a year-on-year dip of 0.3 of a percentage point, after recording an 11.1 per cent increase in June. In Victoria, where lockdown restrictions were in place in June and July, sales growth was up by 4.4 per cent for July, but still slow compared to June’s 10.1 per cent increase.
Meanwhile, a week-long lockdown in South Australia also impacted sales growth in the state, where a 1.5 per cent year-on-year increase was recorded, down on the 11.4 per cent surge observed the month before.
The sectors to record the slowest sales growth were the arts and recreation industry, which saw a year-on-year fall of 9.2 per cent, and the hospitality industry, which recorded a year-on-year drop of 6.5 per cent.
Xero’s latest figures also show payment times for July extending by 2.8 days to 23.3 days, after they narrowed to a record low of 20.5 days in June. However, the index suggests the delays were expected, and reflect similar end-of-financial-year trends seen in New Zealand and the United Kingdom through March.
The index does, however, point to good news for wage growth, which was the only measure to escape the economic impacts of national lockdown restrictions. Average hourly earnings for the month rose by 2.6 per cent, compared with the same period last year.
It falls only marginally short of June’s 2.7 per cent increase, but remains down on pre-pandemic growth levels of around 3 per cent.
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