Small businesses face waning consumer demand due to lasting inflation
Organisations in regional areas are also facing an increase in job vacancy rates, almost two and a half times greater than pre-pandemic.
Small businesses are preparing for waning consumer demand set to be brought about by lasting inflation according to the Commonwealth Bank, while the Council of Small Business Organisations Australia (COSBOA) found labour shortages and increasing job vacancy rates were strangling small firms.
CommBank’s group executive of business banking, Mike Vacy-Lyle, said the small business sector was extremely focused on looking to be prepared for the impact of persistent inflation.
“While inflation is creating challenges for many small business owners, the sector remains focused on being prepared,” said Mr Vacy-Lyle.
“Australian entrepreneurs continue to show considerable grit and we are reminded of the amazing resourcefulness shown during COVID-19.”
“We’re seeing customers respond in pragmatic ways by making adjustments to their operations in response to an anticipated reduction in consumer demand.”
Research conducted by the firm found the drop in consumer demand was small businesses’ greatest concern with 36 per cent listing it, followed by the cost of business insurance at 31 per cent and transport and logistics costs at 28 per cent.
CommBank found many small entities were more prepared than ever to act and adjust as they anticipated a drop in consumer demand with many yet to feel the impact of inflation and other pressures which were predicted to influence customer spending.
The research found that the majority of small business owners (36 per cent) were cautious regarding the challenging conditions while 31 per cent were uncertain and 27 per cent were optimistic about the coming year.
“We encourage our customers who experience financial difficulty to reach out for support early,” said Mr Vacy-Lyle.
“CBA banks more than one in four of all businesses and we are here to support this important part of the Australian economy by offering personalised support and flexible loan structures to help at every stage of the businesses’ life.”
COSBOA’s recent quarterly report found small businesses were facing a unique combination of challenges more than just dropping consumer demand with inflation, rising energy prices and labour shortages impacting them as they look to emerge from the pandemic.
The report released by COSBOA and Square found the fourth-highest job vacancy rates on record with open positions almost triple pre-pandemic numbers during the last quarter of 2022 and the first quarter of this year.
The CEO of Rural Business Tasmania, Elizabeth Skirving, said regional areas were suffering the most with vacancies in some sectors running at 250 per cent of pre-pandemic rates and above.
“These challenges include a decrease in migration, a loss of backpackers, changes in the horticultural code and economic uncertainty,” said Ms Skirving.
“These issues have contributed to higher job vacancy rates, which created additional obstacles for small businesses trying to recover from the pandemic.”
COSBOA said it would be impossible for these small businesses to realise their full potential with many forced to reduce operating hours and scale back services and products.
COSBOA chair Matthew Addison said without more support, the sector would be dragged back down.
“Despite facing challenges such as interest rate rises, energy costs, skills shortages, and other pressures, small businesses in Australia have displayed resilience and managed to make the best of the holiday period,” he said.
“However, as the data makes clear, the Australian small business community is operating in increasingly uncertain economic conditions.”
“It is crucial to provide ongoing support and engagement to help small businesses weather these challenges.”
The small business body urged Australians to shop locally and develop business relationships within their community.
COO at COSBOA William Harris said while uncertain times were likely to continue, having greater government support and community backing would bolster the resilience of small businesses.
“Small businesses are the heartbeat of Australia’s economy and local communities, contributing significantly to growth, innovation, and job creation,” said Mr Harris.
“It’s vital to understand the challenges they face and foster collaboration among governments, industry bodies and consumers to create a supportive ecosystem.”
Mr Addison said the second Quarterly Small Business Data Report, with input from software company Square, aimed to provide “valuable insights for industry bodies, small businesses, and policy makers alike”.
About the author
