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Small businesses buckling under the pressure of rising costs and a sluggish economy have been hit with $7 billion in unexpected costs in the past year, highlighting the financial pressure on the nation’s engine room.
More than half of small business owners reported their mental health had been affected by the current cost of living crisis, according to research released by the Commonwealth Bank of Australia.
Small businesses have been hit with $7 billion in unexpected costs in the past year.Credit: Dominic Lorrimer
“They’re drawing up on those cash reserves built over the last couple of years to navigate current economic times,” said Rebecca Warren, small business banking executive general manager at CBA. “They’re considering modifying and adjusting their business to adjust to [the circumstances].”
Two-thirds of small businesses said they had to deal with unexpected expenses in the past year, with almost half of those hit with equipment repair costs, as well as higher supplier and utilities costs, totalling about $7 billion – on average about $4500 for every business.
The online polling was conducted by YouGov between August 1 and 7 and surveyed 510 people. The figures were weighted to represent the 2.5 million Australian small and medium businesses.
Council of Small Business Organisations Australia chief executive Luke Achterstraat said the CBA research aligned with what he had been seeing across the country, and that the situation had worsened for businesses since the COVID-19 pandemic.
‘Pockets of the market are more likely to be impacted by the knock-on effect from households tightening their budgets on discretionary spending.’
Rebecca Warren, CBA
“Yes, the pandemic was highly stressful, but there was significant support from government in terms of JobKeeper, state-level grants and even rent relief. There was a lot of intervention,” Achterstraat said. “The operating environment has not necessarily improved as people hoped and there isn’t that same level of support.”
Achterstraat said a survey his organisation recently conducted showed small businesses were less optimistic about the next 12 months, compared with the last 12 months, in a sign of the tough operating environment.