Why 2024 has been one of the WORST ever for Aussie restaurants and cafes – as they go bust at a record rate
Restaurants and cafes are failing at higher rates than other businesses as consumers pinch their pennies and retail rents soar amid the cost-of-living crisis.
Rents place a particularly high burden on food and beverage venues as they are typically located in high foot traffic retail strips and re-locating for better deals usually results in less trade.
Food and beverage businesses were going under at the highest rate of all industries tracked by credit reporting bureau CreditorWatch.
In August, businesses in the industry were failing at a rate of 8.2 per cent.
Hospitality businesses are particularly vulnerable to higher interest rates, as consumers rein back on discretionary spending.
CreditorWatch chief economist Anneke Thompson said conditions had deteriorated quite rapidly for the sector after a good run post-Covid lockdowns when people had no opportunity to spend on going out or holidays.
But much higher mortgage repayments and rents have since started to weigh heavily on consumer spending, making it difficult to increase menu prices to cover higher business costs.
Other interest rate sensitive sectors, such as construction, were also under more pressure than other parts of the economy.
Overall business failure rates had jumped 17.3 per cent since January and were now sitting at their highest level since early 2021, which was deep in the COVID-19 pandemic
Overall business failure rates had jumped 17.3 per cent since January and are now at their highest level since early 2021, which was deep in the COVID-19 pandemic.
Business Council chief executive officer Bran Black says it’s not just the economic climate making it harder to run a business but political decisions as well.
In a speech to the business lobby’s annual dinner on Tuesday, Mr Black took aim at the federal government’s workplace changes, saying they were a handbrake on hiring.
Prime Minister Anthony Albanese, who spoke at the same event, countered by saying job creation had been strong under the reforms.
Mr Albanese expects Thursday’s labour force data to show one million new jobs have been created on his watch.
‘We are proudly pro-business and pro-worker,’ he said in a speech.
‘We understand secure jobs and fair wages depend on thriving businesses, just as we know productivity gains depend on skilled workers and safe workplaces.’
Prime Minister Anthony Albanese defended his government’s record on job creation
Mr Thompson said Australian businesses were operating under extremely challenging conditions.
Low levels of consumer spending, high inflation and interest rate increases have been putting pressure on businesses.
Yet high failure rates also reflected a level of ‘catch-up’ from pandemic-era lows, Ms Thompson said, when many businesses were saved by JobKeeper payments and a pause on tax office debt collection for firms.
