Restaurants and cafes are going bankrupt at a higher rate than other businesses as consumers watch their pennies and retail rents take their toll.
All businesses face cost pressures, but rents are an especially heavy burden for hospitality venues. They are typically located in busy shopping centres and it is not easy to move for a better deal.
Companies in the food and beverage sector went bankrupt the most of all sectors tracked by credit rating agency CreditorWatch.
In August, 8.2 percent of companies in the sector went bankrupt.
Hospitality companies in particular are vulnerable to higher interest rates, which depress consumer spending.
Anneke Thompson, chief economist at CreditorWatch, said conditions for the sector had deteriorated rapidly after a good period fuelled by revenge spending following the pandemic.
But mortgage payments and rising rents are starting to weigh heavily on consumers’ wallets and spending, making it harder to raise menu prices to cover high operating costs.
Other sectors sensitive to interest rates, such as construction, were also under more pressure than other parts of the economy.
The total number of corporate bankruptcies has increased by 17.3 percent since January, and is now at the highest level since early 2021, when the COVID-19 pandemic was still raging.
Total bankruptcies have risen 17.3 percent since January, and are now at their highest level since early 2021, when the COVID-19 pandemic was still raging.
Bran Black, chief executive of the Business Council, says it’s not just the economic climate that makes it harder to run a business, but also political decisions.
In a speech at the business lobby’s annual dinner on Tuesday, Black criticized changes to the federal government’s workplace, saying they are slowing hiring.
Prime Minister Anthony Albanese, who also spoke at the event, said the reforms had led to strong job growth.
Mr Albanese expects Thursday’s labour force figures to show that a million new jobs have been created under his administration.
“We pride ourselves on being pro-business and pro-worker,” he said in a speech.
“We understand that safe jobs and fair wages depend on thriving businesses, just as we know that productivity gains depend on skilled workers and safe workplaces.”
Prime Minister Anthony Albanese defended his government’s policies on job creation
Mr Thompson said Australian businesses were operating under extremely challenging circumstances.
Low consumer spending, high inflation and rising interest rates are putting pressure on businesses.
Yet the high failure rates also reflect a catch-up from pandemic lows, Thompson said. Businesses that might otherwise have gone bust are being supported by JobKeeper payments and the taxman’s debt collection has been suspended.