Beauty therapist Giulia Teaupa says she nearly had to close her business when the steepest interest rate hikes in a generation nearly hit her financially.
And she is among the lucky ones: a record number of other companies went bankrupt in the past financial year, simply because customers could not spend their money.
This nationwide corporate collapse is a worrying sign that Australia is heading for a jobs disaster unless the situation improves.
Ms Teaupa, who runs Beautician Australia in the Sydney suburb of Miranda, has struggled with cash flow as clients, burdened by the low cost of living, postponed treatments such as eyebrow tinting.
“It was just really stressful. It was really stressful and I didn’t know how long this period was going to last,” she told Daily Mail Australia.
The 39-year-old married mother of two and three employees was on the verge of closing her business at the end of 2022, after six years, because sales were declining.
“We’ve had Covid, I’ve had children in between, we’ve been through the wringer,” she said.
‘There have been times when I thought it might be better to close the business. Because as an entrepreneur you sometimes wonder if it’s worth it.’
Giulia Teaupa, who runs Beautician Australia in the Sydney suburb of Miranda, was on the verge of bankruptcy after higher interest rates meant she had fewer customers
But she was lucky: she managed to avoid bankruptcy, despite the fact that more than 11,000 companies went bankrupt in the last financial year, the highest number ever.
Ms Teaupa said it was a close call as she struggled to pay the rent on her shop in Sydney’s Sutherland Shire.
“These rate hikes put a huge strain on our business because they changed our customers’ spending patterns. That affected our weekly income, we had to worry about paying bills and rent, our finances were strained and ultimately our cash flow was crippled,” she said.
“If it’s an organic sink, it’s very scary because you just don’t know when you’re going to come back up, or if you’re going to come back up at all.
‘That’s actually where most businesses close.
‘And I definitely thought a few times, “Oh gosh, is this it?”‘
In 2023-2024, 11,049 companies went into external management.
This is a terrifying milestone: it is the highest number of bankruptcies since the Australian Securities and Investments Commission began collecting and publishing insolvency data in 1999.
Angus Taylor, shadow Chancellor of the Exchequer, said domestic inflation and multi-employer negotiations were the cause of the insolvency crisis.
“Small businesses are suffering from skyrocketing energy costs, poor employment laws, rising costs and excessive bureaucracy,” he told Daily Mail Australia.
“This is the result of a government with the wrong priorities and no interest in Australian small and medium-sized businesses.”
But Labor says the $300 electricity rebates and revised tax cuts in phase three would help small businesses.
“We know businesses are under pressure from higher interest rates and weak demand in our economy. We are doing something about it, with tax breaks and energy refunds for small businesses and tax cuts for all taxpayers,” a government spokesperson told Daily Mail Australia.
Although the number of bankruptcies was at a record high, the bankruptcy rate of 0.33 percent was still below the twenty-year average of 0.43 percent.
Ms Teaupa was able to revive her business last year thanks to the aglow app, which allows salon customers to pay in installments instead of up front.
This brings them back into her business, which she founded in 2016, and allows her to plan her income stream for the coming month.
Other retailers are relying on ‘buy now, pay later’ apps to retain customers, with major banks not expecting a rate cut until 2025.
Matthew Caddy, partner at restructuring firm McGrathNicol in Melbourne, said Covid-related supply constraints, higher labour costs and higher interest rates were exacerbating the situation as businesses struggled to retain customers.
“A lot of those issues persist because of rising input costs, access to labour and delays,” he told Daily Mail Australia.
‘People are not spending as much as usual.
‘If you have a mortgage, it doesn’t matter how high it is. Your interest-only years will increase considerably and that has to have consequences somewhere.’
Construction companies are the biggest victims of the steepest rate hikes in a generation. Twelve of the thirteen hikes in 2022 and 2023 came under Prime Minister Anthony Albanese.
More than a quarter of the companies that go bust are construction companies, leaving Australia struggling with a housing shortage after immigration topped 500,000 for the first time last year.
“There are significant risks associated with these contracts. Many of the contracts do not contain any provision for cost increases,” Caddy said.
“If you look at the input costs of a building – whether it’s concrete, plaster, labor – they’ve all gone up.
‘These costs cannot usually be passed on to the developers, as it concerns a fixed-price contract.’
Then there are hospitality businesses, known as accommodation and food services, which account for one in six bankruptcies. Figures from the Australian Bureau of Statistics show retail sales remained flat in June.
“If you go to a lot of restaurants these days, they’re pretty quiet,” Mr. Caddy said.
But they are far from the only companies struggling. The steepest rate increases since the late 1980s caused retail sales to shrink in the second quarter.
Economic growth is stagnating and interest rate hikes are slowing, meaning annual inflation did not rise to 3.8 percent in June, the first quarterly increase in two years.
Australian drinks brand Billson’s went into voluntary bankruptcy last month after 159 years in business.
Husband and wife team Nathan and Felicity Cowan, who ran the historic brewery in Beechworth, north-east Victoria, are devastated by the demise of the business, which was founded in 1865.
Husband and wife team Nathan and Felicity Cowan, who ran the historic brewery in Beechworth, north-east Victoria, are devastated by the demise of the business, which was founded in 1865.
The couple blamed the sharp drop in consumer spending, linked to high inflation and index-linked excise duties on spirits, for the demise of ready-to-drink canned vodka and craft beer.
“Over the past seven years, everyone’s hard work and passion has resulted in overwhelming support from people across Australia and incredible growth for the company,” the researchers said.
‘Unfortunately, that growth masked a number of mistakes we made along the way, because our systems and processes couldn’t keep up.’
Bradley R. Holland, director of Ranger Red’s Zoo and Conservation Park in Pinjarra, south of Perth, said his company had been forced into bankruptcy after struggling to attract visitors as Australians opened their wallets due to the cost of living crisis.
“Look what we’re going through: we’re in the middle of an interest rate crisis,” he told Daily Mail Australia.
‘Things like going out to eat or going to the zoo, those are luxuries.
“People are struggling to pay their mortgages and put food on the table. And if they’re renters, they’re struggling to pay their rent.”
Bradley R. Holland, director of Ranger Red’s Zoo and Conservation Park in Pinjarra, south of Perth, was one of more than 11,000 businesses that went bust in the last financial year – the highest number ever
Mr Holland, who also pays rent to run a business, said his own customers had told him that even visiting his zoo near Mandurah was a significant financial challenge.
“You just have to talk to the average citizen on the street,” he said.
“It’s really scary because it limits cash flow.”
Ranger Red’s Zoo and Conservation Park ceased operations on June 18 and was placed under voluntary administration. On July 9, the zoo went bankrupt.
The zoo now operates under the same name, but through a new parent company, Red’s Productions, which is headed by Mr. Holland.