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Small businesses need relief on costs, labour to weather ‘perfect storm’: COSBOA
Australia’s small businesses are facing a “perfect storm” of financial pressures and a more challenging post-pandemic economic environment defined by workforce struggles and declining revenue, according to new research from the peak industry body calling for energy and rental cost relief and other targeted support.
The Council of Small Business Organisations of Australia (COSBOA) shared the findings and recommendations on Friday in its Small Business Perspective Report 2023, focussing on the vulnerabilities and opportunities emerging in what has been another challenging year.
“Small businesses are vital to Australia’s economy, employing 6.8 million Australians and generating $856.8 billion in revenue in the previous financial year,” COSBOA said in the report, noting that this sector – which accounts for nearly half of the country’s employed workforce – contributed $68.6 billion in net income tax and $19.2 billion in net GST in FY21-22.
“However, they face a challenging operating environment characterised by the rising costs of energy, labour, insurance and rent,” while rising interest rates and cost-of-living pressures have reduced consumer discretionary spending and overall revenue in nearly all sectors, it said.
Rising costs, labour challenges loom large
The report, which surveyed small business leaders among COSBOA’s membership, found that significant global and domestic pressures have created a particularly challenging environment for small businesses, which are facing higher costs and lower revenue as “long-tail effects” of the pandemic.
As successive interest rate rises take their toll on all small business sectors, businesses are facing rising energy and insurance costs, as well as higher production costs driven by challenging labour conditions and both global and domestic supply chain pressures.
“Despite some enjoying the benefits of economic stimulus during the COVID-19 pandemic, small businesses are now collectively experiencing financial strain due to a perfect storm of cost-related pressures,” the report stated.
Small businesses – particularly those competing against larger companies for skilled labour – cited labour shortages as another key obstacle, with many struggling to train, hire and retain skilled workers in an increasingly competitive environment.
Respondents viewed policy measures, including increased access to skilled migrants, as necessary to address the skills gap, although they emphasised that skilled migrant labour is currently too expensive for most small businesses.
“For small businesses to remain competitive in the labour market, industry leaders also desire greater consultation with the small business sector before major industrial relations decisions are made,” COSOBA said. “Recent and upcoming changes to regulation are mostly viewed as significantly costly for small business, and leaders seek well-communicated, simplified reform in the future.”
Emerging opportunities and risks
The report highlighted the need for small businesses to navigate the digital transformation and the associated opportunities and risks, with most industry leaders surveyed expressing a belief that artificial intelligence (AI) and other emerging technology could help them meet changing customer demands and reduce their costs and time spent on tasks.
“Some industry leaders also see the potential risks of it disrupting sectors and widening the gap between small and larger businesses,” COSBOA said. “Most leaders therefore desire additional support to assist small businesses with navigating the digital transformation.”
And while small businesses are increasingly aware of the growing risks of cyber-attacks, most are still largely unprepared to protect themselves against cyber-threats, it found.
The report also identified a need to nurture small business entrepreneurship and innovation, noting that many new small businesses find it hard to obtain the skills and support they need to break through and thrive in a challenging economic landscape.
COSBOA noted that it recently submitted recommendations to the Select Committee on the Cost of Living aimed at mitigating some of the cost-related challenges facing small businesses and affecting their financial performance, including recommendations for energy and rental cost relief, downward pressure on insurance premiums, reduced barriers to entry exit and lighter regulatory burdens.
“To ensure the continued success of small businesses and promote overall economic prosperity and wellbeing of the Australian community, it is crucial to address these challenges and provide the necessary support for small business owners across various sectors,” the report concluded.
