Wages within the SME sector have experienced a notable month-on-month decline for the first time in six months, prompting a closer examination of the challenges and opportunities that lie ahead. Meanwhile, the average employee growth has increased only marginally (0.04 per cent) MoM within the SME sector.
The recent -0.3% decline in the monthly median hourly rate from October to November carries significant implications for SMEs navigating the current economic terrain. This trend, while reflective of broader economic shifts, unveils distinct variations across enterprise sizes, industries, and regions.
Within this overall decline, smaller enterprises have emerged as a beacon of resilience, showcasing a commendable 0.6% increase in their median hourly rates. This underscores a potential avenue for growth and adaptability within the SME community.
The regional landscape reveals a diverse economic tapestry, with South Australia, Victoria, and Tasmania experiencing increased median hourly rates. This localised positive economic activity stands out against the backdrop of the broader decline, offering hope for regional SMEs.
Certain industries, such as Healthcare and Community Services, Science, Information and Communication Technology, and Manufacturing, Transport, and Logistics, witnessed more pronounced month-on-month drops in wages. This emphasises the sector-specific challenges SMEs are contending with, demanding tailored strategies for adaptation and growth.
The nuanced impact extends to age-specific variations, with differences in median rates for 18-24-year-olds and 25-64-year-olds. This highlights the multifaceted nature of economic challenges faced by SMEs, requiring tailored approaches to address varying workforce demographics.
Strategic Adaptation for SMEs
As the SME Index provides critical insights into the economic landscape, SMEs are urged to adapt strategically. With wages aligning with inflation and marginal increases in average employee growth, businesses must consider effective measures to sustain operations and navigate potential uncertainties. Ben Thompson, Co-founder and CEO of Employment Hero, emphasises the need for a strategic pause in interest rate increases, marking a potential turning point in the nation’s economic trajectory. The challenges extend to the retail sector, where the cost of living exerts additional pressure. Despite a slight 1.3% increase in median hours worked year-on-year across Australian SMEs, the Retail, Hospitality, and Tourism sectors experienced a notable decline of -1.4% year-on-year and -3.2% quarterly. This suggests a potential response to weakened in-store foot traffic, reinforcing the need for adaptive strategies within these industries.
Ben Thompson, Co-founder and CEO of Employment Hero, said: “After months of slowing, wages in Australia’s SME sector have decreased for the first time in six months. As the data shows wage growth is flattening to align with inflation, the RBA must consider halting interest rate increases for at least the near term.
“This critical alignment of wage growth with inflation and an ongoing decline or slowing of average employee growth in SMEs marks a potential turning point in the nation’s economic trajectory. Our data indicates that the economy will continue to cool off as we head into 2024 and it is likely mid-next year, we’ll see SMEs cutting back on hiring and growth plans as the economy potentially enters a small recession.”