SMEs battle unique combination of inflation, labour drought

Despite resilience during the pandemic, a COSBOA report says small businesses risk being dragged back down by challenges to their viability.

Small businesses face a unique combination of challenges due to inflation, rising energy prices and labour shortages as they struggle to emerge from the pandemic, according to a report released by COSBOA and Square.

It found the fourth-highest job vacancy rates on record with open positions almost triple pre-pandemic numbers during the last quarter of 2022 and first quarter this year.

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 create additional obstacles for small businesses trying to recover from the pandemic.”

COSBOA said it would be impossible for small businesses to realise their full potential with many forced to reduce operating hours and scale back services and products, with the organisation’s chair Matthew Addison adding without more support the sector would be dragged back down.

“Despite facing challenges such as interest rate rise, 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”.

This article was originally featured in Accountants Daily on 29 March.