Resilient Aussie SMEs ‘buck the global trend’ despite tightening economic outlook

Australian small businesses continue to remain resilient in the face of high interest rates, persistent inflation and other economic pressures according to new data released today by global small business platform Xero as part of a health check into Australia’s small business economy.

While the latest Xero Small Business Index (XSBI) revealed that from July to September 2023 small business performance dropped slightly, the data also showed that Australian small businesses remained remarkably resilient given the challenging economic environment.

In terms of sales growth, Australia was the best-performing country compared to other XSBI countries New Zealand, the United Kingdom, the USA and Canada.

Australia’s sales growth saw a rise of 5.5% year-on-year in September and averaged 6.2% year-on-year from July to September, with results indicating that sales are now growing below the pre-COVID average which was 7.8% year-on-year.

Xero country manager Australia Will Buckley said despite this year’s challenges, it was promising to see Australian small businesses remaining resilient and, in some industries, even thriving.

“Although overall performance has dropped slightly this quarter, Australian sales growth is bucking the trend when compared to overseas markets,” he said. 

“This shows that Australian consumers are continuing to show their support for small businesses despite high interest rates and persistent inflation having an impact on household budgets. 

“We hope to see sales growth recover and payment times remaining stable in the next quarter, as steady cash flow will be imperative to smooth trading during the important holiday season.”

Buckley said as 2023 has unfolded, it’s surprising how well Australian small businesses have been holding up.

“This is especially so when you compare Australia to other countries captured by Xero’s Small Business Index, and when you consider the many macro headwinds, such as cost-of-living pressures and rising interest rates, that Australian businesses are facing,” he said. 

“Overall economic growth in the UK is softer than in Australia, which likely explains why UK small business sales are weaker. Australian small businesses also appear to be attracting a larger share of economic activity than is flowing to small businesses in North America.”

The Xero Small Business Index has also found that wage growth rose just 1.9% year-on-year in September, marking the smallest monthly rise since December 2020, while job growth remained steady and increased by 3.0% year-on-year in September.

Rianna Bingham who co-owns New South Wales business Wildflower Espresso, which started as a coffee shop and now sells ethically designed and made apparel and lifestyle goods, with her husband Jack said it was validating reading data points like those in the Xero Index. 

“Because when you’re operating constantly at such close range (to the figures, the operations, the challenges), it’s difficult to measure or perhaps articulate the toll of so many external pressures,” she said.

“The cost of almost everything in our business has risen over the last couple of years and it’s easy to just include rising wages in this category but the reality is, especially in a small business, we see the impact that living in this economy has on our staff in such a direct way, that it really only feels fair to increase their wages.

“We are really passionate about hospitality being a viable, sustainable and enjoyable job for people and that means ensuring they’re earning enough to keep their car on the road, pay their rent and live a life they enjoy.”

Bingham said she loved that the Index mentions the resilience of small business owners. 

“Skills aside, that is the magic ingredient in running a small business through a global pandemic, through a tough economic environment, through interest rates, inflation etc. It’s always our resilience that gets us through,” she said. 

“We’ve found our sales have been positively impacted when we let people see that resilience in action; when we’re transparent about our struggles and when we’re honest about things like price increases or sales goals. 

“It’s a special position to be in to be able to communicate so openly with people who are invested in your business and it’s been really encouraging to see so many people want to get behind small businesses at this time.”