Bank boss warns Australia in 'race to the bottom' as small businesses under stress

There’s a part of the cost‑of‑living crunch we don’t talk about enough. What it’s doing to small business.

The Australian Small Business and Family Enterprise Ombudsman summed up the past year plainly: rising input costs, squeezed margins, heavier regulation, supply chain stress, and changing consumer behaviour. Small businesses are wearing all of it, all at once.

Speak to any small business owner and you’ll hear the same thing. It’s not one big problem, it’s ten smaller ones, all rising together. Wages. Rent. Power. Insurance. Loan repayments. And the question that sits in the gut before the doors even open: will customers who are stretched still come in today?

For many owners, every day feels like a negotiation, with customers, suppliers, landlords, and lenders just to keep the lights on.

That’s the part most people don’t see.

Small business doesn’t have the buying power of big corporates. They can’t demand better terms. They can’t spread costs across massive volumes. They can’t absorb shocks with deep pockets and teams of specialists.

And small businesses aren’t only competing with each other. Too often, they’re at the mercy of the big end of town.

We’ve seen it play out recently with social media platforms. Small businesses waking up to find accounts they rely on locked or suspended. Operations effectively halted overnight, with no human to call and no clear path to appeal. One decision inside a giant system wiping out small business shopfronts overnight.

Pete Dillon and husband Jigs Liwanag have been running Hotel Canberra in Ballarat for four years but say costs are getting out of control. · Supplied

It’s a similar story with online shopping. By the end of this decade, global online retailers are expected to control half of Australia’s retail market. This growth won’t come from nowhere, but our smallest local businesses. We worry about “AI slop”, but we should also worry about online slop – a race to the cheapest click. I enjoy nothing more than having a yarn as I buy my morning coffee or pick out a gift from a market stall, which can’t be replicated by an algorithm.

Then there’s banking, which is closer to home for me. I’ve worked in this industry for many years. I’m proud of parts of what we do. But I’m also frustrated by how often small businesses are let down. Take merchant fees for instance – the costs are complex, opaque, and almost impossible for a small operator to challenge, and a lot to swallow – in order to survive they need to reluctantly pass on the costs to their customers through surcharges.

Story Continues

It’s David versus Goliath most days. No safety net. Just someone behind a counter, in a ute, or at a kitchen table at 10pm trying to make the numbers work.

That’s why our bargain culture has a hidden cost.

In a cost‑of‑living squeeze, consumers shop around. We chase deals. We ask for discounts. We compare price. We go online to retailers who can deliver the same thing today, cheaper. That behaviour is understandable.

But when price becomes the only thing that matters, small business simply can’t compete.

Large corporates can negotiate cheaper supply, spread costs, and squeeze terms. A small operator can only cut so far before they cut into quality, staff hours, or their own pay. After that, they don’t bounce back. They close their doors.

And when a small business fails, it’s not just a shopfront that disappears. It’s local jobs. Local families. Apprenticeships. Sponsorship of the local footy club. The familiar faces that make a suburb feel like a community.

Small businesses offer something big systems can’t replicate – they know your coffee order, your dog’s name, and greet you like a regular, not a transaction. But there’s only so much that small businesses can smile through.

So what can we do, without pretending households aren’t doing it tough too?

One thing we can all do is aim our bargaining where the power and margins actually sit.

Push hard on the big players who can take it. Re-negotiate with your bank on rates. Challenge your telco and insurer. Cancel the subscriptions that crept up quietly that you’re not even using. If you’re going to squeeze someone, squeeze the organisations built to absorb it.

And when it comes to small business, support them in ways that genuinely help. Pay on time. Leave a review. Recommend them. Deliberately choose local.

That’s what voting with your wallet can look like right now. Not just chasing the cheapest price, but choosing the kind of economy we want to live in.

Small business owners are resilient. Many will adapt and find a way through this cost‑of‑living crisis. But many won’t.

If we want an Australia where our local shops and communities thrive, we can’t treat small business as just another price point.

John Arnott is Director AMP Bank GO and has more than 20 years of experience in the retail and business banking space.

Get the latest Yahoo Finance news – follow us on Facebook, LinkedIn and Instagram.

Bank boss warns Australia in ‘race to the bottom’ as small businesses under stress

Tags: