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Wage growth slows despite talent drought

Business

Xero research reveals sales are up but salaries are slowing in face of labour shortages.

By Josh Needs4 minute read

Acute labour shortages failed to accelerate wage increases that slowed down in May, according to the latest Xero research.

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After a 4.3 per cent increase in April, wages grew just 3.7 per cent in May and some sectors were affected more than others.

The transport sector recorded the slowest growth at just 2.9 per cent, closely followed by arts and recreation at 3.0 per cent.

The slowdown could be due to small businesses failing to keep up with the big end of town, said Xero economist Louise Southall.

“The surprise decline in wages in May, coupled with the soft jobs results in recent months, suggests small businesses might be struggling to compete with larger businesses to find the staff they need to keep growing,” said Ms Southhall.

Small-business jobs grew a mere 0.3 per cent in May year-on year according to Xero research, and it came after two months of declines.

The largest job growth was recorded in the administration and support service industry, up 4.5 per cent.

Education and training continued its decline for the ninth consecutive month with jobs declining 5.0 per cent year-on-year.

Ms Southall said the positive result for job growth came after several months of declines.

“While jobs remain soft, this is a welcome break following a trend of slower and falling jobs growth over the past seven months,” said Ms Southall.

“Ongoing high levels of job advertisements indicate supply remains the issue, with demand for more workers clearly there as small businesses continue to compete for staff.”

Xero managing director Australia and Asia Joseph Lyons said that while it was small, the growth was a positive for small businesses.

“It’s promising to see an increase in jobs,” said Mr Lyons.

“While the data indicates only small growth, we know that any and all support for small businesses is important.

“It’s been an ongoing challenge for many to find talent, hampering their ability to fully recover – we all know a restaurant or café that’s struggled to open its doors due to lack of staff.”

Mr Lyons said the opening of borders and arrival of more international talent should assist businesses going forward.

“We hope to see this growing jobs trend continue as Australia gradually welcomes new talent from overseas and expands the labour pool,” said Mr Lyons.

Sales across May grew substantially, by 10.8 per cent, up from 8.3 per cent in April, which Xero attributed to a combination of higher prices and increased volume.

However, rising cost-of-living pressures hurt industries that rely on discretionary spending, with below-average results for hospitality sales at only 2.8 per cent and information media and telecommunications at 6.4 per cent.

“With inflation continuing to rise this result was expected as Australians reduce discretionary spending and focus on necessary purchases,” said Ms Southall.

“Consumers are becoming more pragmatic due to the combination of increasing prices and only modest wage growth.

“This can be seen in weaker sales results for the hospitality, information media and telecommunication industries.”

The Xero Small Business Index is based on aggregated and anonymised transactions from thousands of small businesses using the company’s software. It is created in collaboration with Accenture and is part of the Xero Small Business Insights program.

Wage growth slows despite talent drought
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Josh Needs

Josh Needs

AUTHOR

Josh Needs is a journalist at Accountants Daily and SMSF Adviser, which are the leading sources of news, strategy, and educational content for professionals in the accounting and SMSF sectors.

Josh studied journalism at the University of NSW and previously wrote news, feature articles and video reviews for Unsealed 4x4, a specialist offroad motoring website. Since joining the Momentum Media Team in 2022, Josh has written for Accountants Daily and SMSF Adviser.

You can email Josh on: This email address is being protected from spambots. You need JavaScript enabled to view it.

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