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Service-based small businesses lead productivity decline: Xero

13 June 2024
service based small businesses lead productivity decline xero

A report finds wholesale trade was the most productive industry last year while hospitality performed the worst.

Service-based small businesses in hospitality, arts and education led a nationwide decline in productivity last year, according to a new report.

Hospitality businesses generated $40.2 in sales per hour worked in 2023 against a national average of $100.3, according to Xero's Small Business Productivity: Industry and Regional Trends report released on Thursday.

Arts and recreation businesses only averaged $49.7 per hour and education and training businesses averaged $54.9 per hour, the report based on anonymised data from over 240,000 of Xero's small business customers revealed.


The wholesale trade industry was over five times more productive than hospitality, topping the list at $214.2 per hour, despite a 5.2 per cent decline from 2022.

The transport industry averaged $128.5 per hour, while agriculture ($120.6 per hour) and construction ($117 per hour) rounded out the top five most productive industries, reflecting their “commitment to embracing new technology and upskilling the workforce,” Xero said.

“[Agriculture] is one of the oldest industries and yet this result highlights how the sector has consistently incorporated innovation into its operations to achieve this productivity result,” it said.

“Farming today has become a data- and technology-intensive industry, as farmers grapple with big challenges such as minimising the impact on climate and maximising capacity to feed a growing global population.”

Hospitality businesses, with consistently low productivity levels since the pandemic, have also turned to technology in a bid to overcome staffing shortages.

For example, Xero said industry trends included using QR codes and online delivery services to spend more time on productive work such as preparing orders.

“There are notable disparities in small business productivity across key Australian industries and regions, and that while some are thriving, and even exceeding the national productivity average, some are lagging behind,” Xero said.

Western Australia was the most productive state ($102.5 per hour), while Tasmania (A$89.00 per hour) was the least productive state.

Queensland experienced the smallest decline in productivity (-2.3 per cent), a few percentage points higher than the average national decline (-2.5 per cent).

The largest decline was seen in Western Australia (-4 per cent), representing a “pull-back in a state that has outperformed other areas of Australia in recent years”, Xero said.

“These findings underline the need for all small businesses and their advisers, no matter where they are located or what industry they are in, to think about how to lift their own productivity,” Xero said.

It also called on more “productivity enhancing policies” directed at small business from the government.

“Governments need to think about productivity enhancing policies that have widespread application for small businesses, in any location or industry. Governments also need to be particularly aware of a deterioration in productivity in more populous regions and of increased differences in productivity across industries or regions,” it said.

About the author

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Christine Chen is a graduate journalist at Accountants Daily and Accounting Times, the leading sources of news, insight, and educational content for professionals in the accounting sector. Previously, Christine has written for City Hub, the South Sydney Herald and Honi Soit. She has also produced online content for LegalVision and completed internships at EY and Deloitte. Christine has a commerce degree from the University of Western Australia and is studying a Juris Doctor degree at the University of Sydney.


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