Budget 2023: Interest rate hikes put small businesses on brink

A quarter of small businesses owners are not confident they can endure another rate hike after being hit by growing costs and a reduction in foot traffic and consumer spending.

MYOB chief employee ­experience officer Helen Lea says the cost-of-living crisis was ­’hitting all Australians hard, but for small businesses in particular it hits twice as hard’.

A quarter of small businesses owners are not confident they can endure another rate hike after being hit by growing costs and a reduction in foot traffic and consumer spending, with the government facing new calls to assist the sector in the May 9 budget.

The Australian can reveal that a survey of 1029 small ­businesses with fewer than 200 employees commissioned by MYOB found that 40 per cent reported being negatively affected by interest rate hikes, and 35 per cent had had their business loan rate increased.

Almost 30 per cent of respondents said that, if interest rates continued to rise, they would be forced to take money from their personal savings.

MYOB chief employee ­experience officer Helen Lea said the cost-of-living crisis was ­“hitting all Australians hard, but for small businesses in particular it hits twice as hard”.

“In the lead-up to the budget we polled consumers and found 88 per cent of respondents have already adjusted how they spend due to cost of living pressures,” she said.

The most common response was to spend less on entertainment and events, with 54 per cent saying they had already taken this step, and 51 per cent saying they were now sticking to a personal budget and spending less on eating out and food delivery.

“These are industries where many small businesses operate,” Ms Lea said.

“It’s a challenging time for consumers and small businesses alike; the former are tightening their belts, which means SMEs face growing costs, inflation and rate rises, as well as a reduction in foot traffic and spending.

“Anecdotally, local cafes are seeing their regulars come in less frequently, and high street restaurants and shops say people are spending less.

“Small businesses are the lifeblood of our economy. That’s why support for small businesses in the upcoming federal budget is key to driving economic recovery,” Ms Lea said.

The research from MYOB showed that 25 per cent of respondents were not confident they could handle another interest rate rise this year, with the Reserve Bank raising the cash rate by 25 basis points to 3.85 per cent on Tuesday.

The research also showed that 5 per cent were considering selling or had sold their business, 25 per cent had seen interest rates on their business property increase and 33 per cent said the business was run from home and that their mortgage interest rates had increased.

Asked how they would respond to increasing interest rates, 28 per cent said they would take money from their personal savings, 23 per cent said they would limit getting additional access to finance and 14 per cent said that they would need to close the business.

Only 11 per cent said they would not take any action.