Omicron disruptions warning as small business jobs and wages remain solid but sales growth slows in January

Xero's New Zealand and Pacific Islands managing director Craig Hudson. Photo / Supplied

New Zealand's small businesses saw sales growth slow in January, yet employers are looking to pay more as they struggle to find staff, according to a new report from Xero.

Xero's latest report on the small business index fell to 97 points (slightly below average) across the last two months, ending a run of three consecutive months with above average scores in the 100s.

Xero's New Zealand and Pacific Islands managing director Craig Hudson said the index downturn is largely due to small business sales, which slowed to 4.6 per cent year-on-year in January after several strong months as lockdown restrictions ended.

"November and December saw double digit sales growth as Auckland emerged from the Delta lockdown, with businesses able to begin reopening, and Kiwis encouraged to spend locally to help small business recovery," Hudson said.

Despite the slower performance over January compared to previous months, job growth remained above average levels at 4.1 per cent year-on-year with wage growth also up 3.8 per cent year-on-year, following several strong months.

International Omicron lessons

While New Zealand's small business index remains close to average, this is in contrast to Australia and the United Kingdom, which reported indexes of 86 and 85 respectively as widespread Omicron outbreaks negatively impacted small business operations.

Furthermore, Covid-19 related disruption has had a major impact on jobs in Australia decreasing it to 1.5 per cent year-on-year and the UK down to 3.2 per cent, adjusted for base effects, but this hasn't hit New Zealand yet (4.1 per cent year-on-year).

"The international data is a warning of potential things to come for New Zealand businesses. The small business economy in Australia was significantly impacted by Omicron earlier in January, with rising cases and required isolation periods resulting in fewer people being able to work.

"With Omicron forcing New Zealand into red on January 23, this data set only captures about a week of the direct impact Omicron was starting to have on the community," Hudson said.

With cases now at record highs and daily numbers in the thousands, small businesses will be facing some of the biggest challenges they've confronted during the pandemic.

"As Omicron continues to move through the community, small business owners will face staff shortages due to employees needing to isolate, reduced cash flow, and potential temporary closure if their workspace can't be used or their entire workforce is taken out," Hudson said.

"We need to be doing everything we can to support local business in these times. As always, shopping local when possible will help support small businesses, as well as following Covid-19 restrictions to help reduce the spread of the virus.

"Australia and other global markets didn't get the opportunity to prepare for Omicron. We're in a position to learn from what has happened overseas and be better prepared for the worst of this outbreak," he said.