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The latest Small Business Perspectives Report, released by the Council of Small Business Organisations Australia (COSBOA) with the support of Commonwealth Bank of Australia, found 73 per cent of regional, rural, and remote small businesses reported falling profits over the past 12 months, while just 18 per cent were optimistic profits would improve over the year ahead.
The survey also found 87 per cent of businesses had experienced higher operating costs over the past year, only 7 per cent expected expenses to fall over the next 12 months, and 87 per cent of employers that recruited staff had difficulty filling vacant roles.
Meanwhile, more than half (52 per cent) rated housing availability in their community as poor, 37 per cent said fuel costs were placing significant financial pressure on their business, and 77 per cent reported experiencing business-related stress or anxiety during the past year.
Magnified pressures
Xavier Quenon, founder of Gold Coast-based Go Mortgage, said that many of the national issues such as rising costs, interest rates, and economic uncertainty were more pronounced for his clients based in regional destinations such as Townsville and Rockhampton.
“There’s a real squeeze at the moment,” Quenon said.
“The cost of living is going up, taxes are increasing, and there’s a level of uncertainty that’s being created which means profits are coming under pressure.
“When you’re in a big city with a much larger population, you only need a small percentage of people as clients, so you can better absorb the changes. In regional areas, there’s a smaller population and it’s often more concentrated in particular industries.”
Similarly, COSBOA’s CEO Skye Cappuccio said that broader issues facing Australia were amplified in the regions.
“This research shows that where a business operates increasingly determines the challenges it faces,” she said.
“Regional businesses are managing higher operating costs while also dealing with housing shortages, workforce constraints, and limited access to essential services – barriers many metropolitan businesses simply don’t experience to the same extent.”
Additionally, a recent audit of the Australian Tax Office found that small business debt had increased by $19.4 billion between 2018–19 and 2024–25, a 118 per cent increase.
In May, CreditorWatch found payment arrears had climbed to their highest level since January 2020.
Businesses hit pause
Across Australia, Equifax found overall demand for business loans increased by just 3.8 per cent year on year, trailing the 12-month average.
Overall demand for asset finance fell 2.4 per cent over the year, extending the cautious investment trend seen in May.
Quenon said the uncertainty created by the federal budget had compounded existing pressures, with many business owners delaying investment decisions and shelving expansion plans.
“We’re seeing businesses delay investment because there’s so much uncertainty, particularly among SMEs that operate through family trusts. In many cases, they simply don’t know what they’re supposed to do next,” he said.
Quenon recalled one of his clients who had sought to purchase a property that could both generate rental income and provide space to store equipment for their business.
Uncertainty surrounding the new ownership settings from the budget, however, meant the client’s accountant could not advise them how to proceed.
“When I spoke to the accountant, they said, ’I can’t advise you on that right now.’ Not because they didn’t want to, but because they didn’t know what the final rules would look like. There are still no transitional arrangements, and they couldn’t say what the best ownership structure would be,” Quenon said.
“That really struck me. If accountants can’t advise clients on the right tax structure because there’s too much uncertainty, people are simply going to sit on their hands.
“I’ve now had that same conversation with three different clients. The accountants are all saying the same thing: ’We don’t know enough yet to advise you.’
“Until there’s more certainty, people can’t make informed decisions, even if they’re ready to invest.”
Broker Daily has previously reported on how economic conditions have been influencing business borrowing behaviour, with demand increasingly moving toward working capital solutions to help aid cash flow issues.
Confidence takes a hit
Quenon said that what had really dampened credit demand among his regional clients had been reduced sentiment.
Indeed, according to National Australia Bank’s Monthly Business Survey, business conditions have held steady for three months, but confidence was still in negative territory despite rebounding from the second-largest fall in business confidence in the survey’s history.
“What really kills activity is sentiment. When confidence disappears, people sit on their hands,” Quenon said and added that the conditions have also been taking a toll on his own business.
“Before the budget, we were getting 20 or 30 leads a week. In the first week after the budget, we got none. Zero.
“Now, two months later, we’re probably getting about half of what we were before.”
[Related: SME confidence weakens after budget tax changes]
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