iscoverAustralian small businesses are remaining resilient as they are seeing a slowdown in sales and elevated economic uncertainty, Xero data has revealed.
Aussie SMEs still optimistic as sales remain volatile, Xero says
31 July 2025
•
8 minute read
The latest Xero Small Business Insights (XSBI) update has reflected a recent decrease in sales and an uptick in global and economic uncertainty for Australian small businesses.
Despite the challenging environment and interest rate cuts yet to have a sustainable impact on consumer spending, small businesses have remained optimistic.
You’re out of free articles for this month
To continue reading the rest of this article, please log in.
Create free account to get unlimited news articles and more!
Data from the period between October 2024 and June 2025 revealed that sales growth had averaged +3.0 per cent year on year in the June quarter, down from +5.3 per cent year on year in the March quarter and +4.5 per cent year on year in the December 2024 quarter.
Xero noted that this result was the smallest quarterly growth in sales since 2020, and below the long-term average of the XSBI series.
However, despite the slowdown in sales, Australian small businesses continued to lead other markets tracked in the series, including New Zealand and the United Kingdom – demonstrating “ongoing resilience” despite challenging macroeconomic conditions.
From this year, the XSBI found that performance had been volatile month-to-month as it had seen frequent spikes and drops from January to June.
Strong rebounds were recorded in both March and June, which were attributed to the RBA’s decision to cut interest rates, suggesting that consumer confidence improved and had a short-term positive impact on spending during that time.
Louise Southall, Xero economist, said despite the continuation of a tough economic environment for small businesses, it was pleasing to see them adopting optimistic behaviours.
“Despite slower growth than in previous quarters, it’s encouraging to see Australian small business sales continuing to rise. Yet, with growth still below the long-term average, it’s clear many businesses are operating in a challenging environment,” she said.
“Easing inflation may pave the way for further rate cuts, which would help lift consumer spending and ease the pressure of loan repayments for small business owners. However, uncertainty remains, particularly as global trade tensions, including US tariffs and their flow-on effects in China, continue to pose potential risks.”
Looking at small businesses across Australia, all states and territories recorded a slowdown in sales growth in the June quarter compared to the two previous quarters.
Western Australia remained the strongest performer, with sales having grown +4.6 per cent, yet this was considered a “slowdown” in the March and December quarters, suggesting that “even the strongest performing states were feeling the effects of current economic uncertainty”.
At industry level, public administration was the best performing, having recorded +7.9 per cent year-on-year growth in the June quarter following double-digit growth in the previous two quarters, while education and training recorded the softest sales performance at -1.2 per cent year on year.
Angad Soin, Xero managing director ANZ and global chief strategy officer, said small businesses needed to ensure they remained on top of their cash flow and strategies to stay ahead of economic challenges.
“Following months of economic uncertainty, it’s reassuring to see the underlying resilience of our small business sector. However, as most small business owners know, it’s important to consistently stay on top of cash flow and be ready to adapt to changing customer behaviour,” he said.
“This will be key in the months ahead and can be as simple as offering flexible payment options or automating invoicing to help get paid faster. This can make a big difference in staying ahead. We know offering more ways to pay helps small businesses get paid faster.”
You need to be a member to post comments. Become a member for free today!
