Construction was again one of Australia’s strongest small business sectors in the September quarter. Underneath the headline, Xero’s data shows hiring speeding up, pay rises slowing and customers taking longer to settle their invoices.

Construction still sits near the top of the small business table

Small construction businesses grew sales 7.9 per cent year on year in the September quarter, according to Xero Small Business Insights data released late October. Only mining, at 12.0 per cent, and healthcare, at 8.1 per cent, did better.

Across all small businesses, sales grew 5.2 per cent. That is down from 7.3 per cent in the June quarter and below the series’ long term average of 7.8 per cent.

The program draws on anonymised accounting data from around 520,000 Australian small businesses. It tracks what is actually moving through the books, rather than how owners say they feel.

Consumer facing industries carried most of the slowdown. Retail grew 2.4 per cent, hospitality 2.7 per cent and real estate services just 1.8 per cent.

Small business sales by industry, September quarter 2026. Chart and data: Xero Small Business Insights, published 29 October 2026.

Xero links construction’s result to demand from housing, state government projects and data centres. Its report also names a second factor: price effects from a surge in construction material costs.

That changes how the number should be read. Part of the growth is higher prices flowing through invoices, not only more work.

Construction sales growth has cooled from its peak earlier in the year

A 7.9 per cent result is strong. It is also a step down.

Construction sales growth ran in double digits through the first half of 2026, peaking at 17.9 per cent in April on Xero’s current monthly figures. Through the September quarter it eased to 7.4 per cent in July, 9.8 per cent in August and 6.5 per cent in September.

Xero economist Louise Southall said the wider small business economy is still digesting the delayed effects of earlier interest rate rises. Xero’s report counts four cash rate rises so far in 2026, alongside elevated fuel prices.

Construction usually feels those effects later than retail or hospitality, because much of the work now on the books was committed months ago. We looked at that lag in our analysis of the June quarter figures.

Construction hiring has accelerated for five straight quarters

While sales growth eased, hiring did the opposite.

Small business jobs in construction grew 6.7 per cent year on year. Only mining, utilities and public administration grew headcount faster. Nationally, small business jobs grew 3.9 per cent.

Our analysis of Xero’s published industry data shows construction jobs growth has lifted in every quarter for more than a year, from 4.0 per cent in the September quarter of 2025 to 6.7 per cent now.

The share of small construction businesses adding staff has risen with it. In August, 31.2 per cent had more people on the payroll than a year earlier, the highest reading since late 2022.

Put simply, more small builders and trade businesses are taking people on.

Pay rises in construction have slowed sharply

The other side of that story sits in the wage numbers.

Construction wages grew 1.8 per cent year on year in the September quarter, on our analysis of Xero’s monthly data. That is down from about 3 per cent in the June quarter and 3.3 per cent a year earlier. It is the weakest quarterly result for construction in the series since at least 2020.

Even so, construction recorded the second largest wage rise of any industry, behind hospitality at 2.8 per cent. National small business wage growth was 1.2 per cent, less than half the long term average of 2.9 per cent.

Southall links the national slowdown to record labour force participation. With workers staying in jobs for longer, she said, there is less pressure on small businesses to lift pay.

Construction waits longer to be paid than almost any other industry

The payment data is where the September quarter shows the most strain for construction.

Across all small businesses, invoices took an average of 24.3 days to be paid and arrived 6.9 days late, according to Xero. Both measures returned to their usual levels after the end of financial year dip in June.

Average late payments, all Australian small businesses, September 2024 to September 2026. Chart and data: Xero Small Business Insights, published 29 October 2026.

Construction sits well above that average. Our analysis of Xero’s industry data shows small construction businesses waited 26.8 days on average to be paid in the September quarter, with invoices settling 9.3 days late.

Of the 19 industries Xero tracks, only utilities recorded longer late payments, at 9.7 days. The construction figure is up from 8.4 days in the June quarter and 9.1 days a year earlier.

What is the late payment measure in Xero Small Business Insights?

Xero measures late payments as the average number of days between the date an invoice is due and the date it is actually paid. It is a separate measure from time to be paid, which counts the days from when an invoice is issued to when it is paid. A business can have short payment terms and still record long late payment figures if customers routinely miss the due date.

More staff and slower cash shift the pressure onto working capital

None of this describes a sector in trouble. Construction is still growing faster than most of the small business economy, on sales and on jobs.

What the data shows is a shift in where the pressure sits. Through the first half of 2026, revenue growth comfortably outran hiring. In the September quarter the two moved closer together, while the gap between invoice and payment widened.

In the September quarter, construction carried more staff and waited longer to be paid. Wages go out weekly or fortnightly. The revenue that covers them is arriving, on average, more than a week after it was due.

In the September quarter, construction carried more staff and waited longer to be paid.

For a business that has grown its team, every extra day an invoice runs late is a day the payroll is funded from somewhere else. It is one reason cash flow for builders can tighten in busy periods as well as quiet ones.

Southall framed the open question for the wider economy plainly. “The real test over the coming quarters will be whether that hiring momentum holds if sales and costs don’t ease,” she said.

Xero’s report also points to the Reserve Bank’s October board statement, which noted firms are facing cost pressures and are raising prices or looking to. Xero reads that as a signal that further rate rises are possible in late 2026 or early 2027.

THE GOOD BUILDER TAKE

On sales alone, the September quarter was another good one for construction. The more telling numbers for small builders are headcount and payment days.

More people on the payroll, smaller pay rises and invoices settling more than nine days late describe businesses that are busy and carrying more of the cost of being busy. That gap is easy to miss when the order book looks healthy.

We will keep tracking Xero’s quarterly data alongside the ABS releases in our Australian Construction Industry Trends Guide. Louise Southall joined Az on The Good Builder Podcast earlier this year to talk through what sits behind the construction numbers, and that conversation is worth a listen alongside this one.

Frequently Asked Questions

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Last updated: 3 November 2026. Figures from Xero Small Business Insights, September quarter 2026, published 29 October 2026.

General information only. This article is general information and commentary. It is not financial, legal or tax advice and does not take into account the circumstances of any individual business. Readers should seek professional advice before making business decisions.

Author: TGB Editorial