Small businesses are facing a worsening cashflow crunch as high inflation, rising interest rates and a string of regulatory changes converge, with credit reporting agency CreditorWatch finding serious arrears hit an 8.5-year high in September and more than half of invoices going unpaid on time.
Builders, designers and other small-business operators say the cumulative effect of economic pressures and policy changes is pushing them to the brink, with many spending more time on paperwork than on their core work.
“It’s just killing us, killing our industry,” builder Steve Bright told the ABC. He said he now spends more than half his time in the office dealing with compliance instead of building houses, forcing him to hire extra full-time staff to manage the changes.
Sunshine Coast designer Debbie Johnson said she was reconsidering plans to pass her business to her son after a tough year. “I really don’t know that as a mother, I would like to see [my son] coming in and taking this business over,” she said.
The policy changes operators are grappling with include the introduction of payday superannuation, a ban on debit and credit surcharges, increases to minimum and award wages, and reforms to trust taxation.
Simon Croft from the Housing Industry Association said reforms were often designed in a “policy silo”, without accounting for their combined impact. “It’s that layering effect of simultaneous changes that then also … trickle down to their business operations,” he said.
CreditorWatch chief executive Patrick Coghlan said the data showed one in 10 invoices were more than 60 days overdue, the highest level of serious arrears since April 2018. “Even though we’re at almost record insolvency levels, the indicators that we’re seeing show that that’s likely to increase,” he said.
The Reserve Bank is expected to decide this week whether to raise interest rates for a fifth time this year. Westpac chief economist Luci Ellis said the biggest single factor squeezing small business was higher fuel and transport costs, which were often passed on to consumers. She noted that the surcharge ban had led some cafes to increase prices by more than the previous surcharge, using the change as permission to adjust prices more broadly.
A survey by accounting platform MYOB found 38 per cent of small businesses had seen a drop in revenue from a year ago, 65 per cent were concerned about cashflow, and 69 per cent worried about attracting new customers. MYOB chief executive Paul Robson said concerns about regulatory changes were still secondary to cost factors including fuel, energy and interest rates.
Charlie Sheppeard, from competing platform Xero, said slow sales growth in sectors such as retail and hospitality made it harder to absorb additional costs from changes like the surcharge ban.
Small Business Minister Anne Aly said the government was aware of the pressures and was delivering billions in tax relief, including making the $20,000 instant asset write-off permanent and backing payment reforms that the RBA has estimated will lower business costs by $910 million a year.
Analysis
Why This Matters
- Nearly 2.7 million small business owners are navigating the current conditions, and an increasing number are falling behind on payments, threatening jobs and local economies.
- The combination of high inflation, rising interest rates and multiple regulatory changes creates a compounding effect that industry groups say is not being fully considered by policymakers.
- CreditorWatch warns that the lagging indicators point to further increases in business insolvencies, which would ripple through supply chains and the broader economy.
Background
Small businesses in Australia have been under sustained pressure from high inflation and the Reserve Bank’s cycle of interest rate rises. At the same time, the federal government has introduced several regulatory changes aimed at improving worker protections and reducing consumer costs, including a ban on debit and credit surcharges, the phased introduction of payday superannuation, and increases to minimum and award wages. Industry associations and operators argue the changes, while potentially beneficial individually, have created a mounting administrative and cost burden when implemented in quick succession.
Key Perspectives
Builder Steve Bright: says the regulatory burden is “killing our industry” and forces him to spend half his time on paperwork, adding costs his business must absorb.
Simon Croft (Housing Industry Association): warns that reforms are viewed in a “policy silo” and their cumulative effect on business operations is not being assessed.
Patrick Coghlan (CreditorWatch): warns that serious arrears are at an 8.5-year high and business insolvencies are likely to increase due to the cumulative effect of changes.
Luci Ellis (Westpac): identifies higher fuel and transport costs as the biggest squeeze on small business and the economy, noting some firms have used the surcharge ban to raise prices further.
Paul Robson (MYOB): says concerns about regulatory changes are still behind cost factors like fuel, energy and interest rates in small business surveys.
Charlie Sheppeard (Xero): notes that slow sales growth leaves little room to absorb additional costs, especially in sectors like retail and hospitality.
Small Business Minister Anne Aly (Labor government): says the government is delivering billions in business tax relief, including making the $20,000 instant asset write-off permanent and backing payment reforms that will lower business costs by $910 million a year.
What to Watch
- The Reserve Bank’s interest rate decision this week, which could add further pressure if rates rise for a fifth time this year.
- Business insolvency figures in coming months, which CreditorWatch says are likely to increase from near-record levels.
- How operators adjust prices and staffing in response to the combined regulatory changes, particularly the surcharge ban and payday super rollout.