Global small business platform, Xero, released its latest Small Business Insights (XSBI) update, indicating that small business sales and revenue surged around 5.5% during the past September quarter – which is said to be the strongest quarterly result in the last 2 years. The recent data and insights suggest the benefits of official interest rate cuts may finally be flowing through to consumer spending and the small business economy.
September quarter highlights shared by Xero are as follows:
- Revenue / sales growth rose to +5.5% year-on-year (y/y) in the September quarter, up from +3.9% y/y in June – the strongest quarterly result in two years.
- Jobs growth grew +2.7% y/y, down from +3.0% y/y in June, with a notable dip in September (+2.0% y/y).
- Tasmania led the states with +6.7% y/y sales growth, its best performance since early 2023.
- Construction was the standout industry, with +6.6% y/y sales growth and +3.9% jobs growth – both two-year highs.
Small business sales / revenue showed a solid recovery in the quarter, following a softer “3.9% y/y rise in the June quarter.”
While still below the long-term average of 7.8% y/y, the growth reflects renewed momentum in the sector. Monthly data showed a familiar pattern of sales spikes “following interest rate cuts, with September (+8.1% y/y) and June (+7.5% y/y) both following the Reserve Bank of Australia (RBA) policy decisions.”
These short-term boosts have yet to deliver “sustained above-average growth, but the data aligns with the RBA’s September statement, noting improving private consumption driven by rising real wages, tax cuts, lower interest rates, and effects from higher house prices.”
Jobs growth slowed in the September quarter, likely “reflecting the lagging impact of softer mid-year sales and ongoing uncertainty for small business owners.”
Despite this current slowdown, significantly more small businesses increased their workforce than in recent months – “28.8% grew their teams, the highest proportion since December 2023.”
But slightly more businesses also reduced staff, with around “24.1% cutting jobs compared to 23.7% in June.”
Angad Soin, Managing Director ANZ & Global Chief Strategy Officer, said:
“This is the most encouraging sign we’ve seen for the Australian small business community in two years. After a period of intense pressure, Xero Small Business Insights data shows the grit of entrepreneurs , coupled with stabilizing economic conditions, is starting to turn the tide.”
As we head into the festive season, including events such Black Friday, it’s a reminder for all of us to “shop local and continue to support businesses at the heart of our communities.”
Louise Southall, Xero Economist, said:
“These figures are tentative but encouraging signs that the Australian economy has achieved the soft landing the RBA has been aiming for.”
They added that the main challenge for the central bank has been to cool inflation without stamping out growth or lifting unemployment.
They have now concluded that this latest data, which shows sales for small businesses accelerating while jobs growth only “moderating slightly, suggests its strategy is having the desired effect.”