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Xero reports small business growth slows as government support dries up

- February 25, 2021 2 MIN READ

The latest data from Xero’s Small Business Insights program reveals small businesses are still suffering the effects of the pandemic with job and revenue growth slowing as the government’s COVID support measures begin to taper off. Still, it’s not all bad news, with the report finding small business jobs remain just above pre-crisis levels despite a seasonal drop.

Support cuts stifle growth

Small business revenue in Australia was 0.9% lower in January 2021 compared to January 2020.  This January result comes against the backdrop of a reduction in national income as two key support payments – JobKeeper and JobSeeker – were reduced at the start of the month.

Industries continuing to be the hardest hit by declining revenues are the arts and recreation (-10 per cent y/y) and hospitality (-5 per cent y/y), although both of these results were an improvement on December’s revenue declines. While NSW  (-1.9 per cent y/y) and Victoria (-1.3 per cent y/y) both recorded the biggest dips in revenue, year on year. IN contrast, WA and Queensland have fared well with 4.5 per cent gains and 1.8 per cent) respectively.

Victoria bounces back

Despite a slide this month, Victoria has almost narrowed the gap in revenue compared to other states as the ongoing impacts of the second lockdown in 2020 have eased. Victorian revenue remains only 0.4 per cent points below the national revenue result and was better than NSW (-1.9 per cent y/y).

Trent Innes, Managing Director Australia and Asia, Xero said despite facing significant lockdowns, Victoria’s small businesses were showing resilience, rebounding from the restrictions.

“Victorian small businesses were dealt a particularly rough hand in 2020 so it’s really pleasing to see the revenue gap having almost closed in January, a period of minimal restrictions. February’s five-day snap lockdown in the state may be cause for change, however, and we will need to await next month’s figures to reveal the extent of its impact.”

Summer holidays impact job opportunities

Small business jobs fell 3.3 per cent month on month in January, with this pattern seen across all industries and in all states and territories. Howvere this is a common phenomenon in Australian summer  and is consistent with job movements during the year prior as a result of seasonal changes.

Despite this, jobs ended 2 per cent higher in January than in the equivalent week a year ago and ended the month 0.1% above pre-pandemic levels.

“The seasonal fall in jobs is something that happens every year. Small businesses often close for an extended period over summer, while some businesses temporarily stand-down employees in response to quieter trading, especially casual workers,” said Innes.

“Importantly, the jobs outlook still remains positive with small business jobs ending January 2% above the equivalent week in 2020. This provides a clearer picture of what is actually happening.”

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