The first pulse-check from Australian Small Business and Family Enterprise Ombudsman Bruce Billson reveals deteriorating conditions for small firms since COVID-19 pandemic-era supports ended and the economy reopened, bringing with it inflation, skills shortages, squeezed margins and a series of interest-rate hikes.
Inflationary pressures remain persistent, as shown by Wednesday's June quarter consumer index ticking higher.
Small businesses have been feeling the pinch from higher interest rates, the ombudsman says. (Flavio Brancaleone/AAP PHOTOS)
Yet in better news for small firms, the reading was unlikely strong enough to trigger another interest-rate hike in this cycle.
Mr Billson said small businesses were hit directly by higher interest rates through the cost of financing but also via customers, with households spending less as higher mortgage repayments dented their bank balances.
Taking a birds-eye view of the entire business life cycle, the Small Business Pulse considers sentiment, operating conditions and the ability to transform or grow a business.
The operating environment had declined in the past two years and fell again in August, driven by "exhausted" business owners in financial distress and considering a "dignified dismount" and worries about regulatory burdens.
"Small business owners are concerned about the viability of their business and whether they can ride the tough economic climate out," Mr Billson said.
With firms largely preoccupied with keeping their doors open, business transformation had taken a back seat.
Firms were less likely to hire staff, advertise, expand their offerings, or dive into other forms of innovation.
There were green shoots on the horizon, with the small business ombudsman able to report more queries from people considering starting a business or reaching out for business coaching or mentoring.
However, Mr Billson said the operating environment remained challenging.
"Concerns about regulation continue to remain high, particularly tax and work health and safety," he said.
Treasurer Jim Chalmers says small jumps in inflation levels are expected. (Paul Braven/AAP PHOTOS)
Federal Treasurer Jim Chalmers has been defending his government's economic strategy following Wednesday's inflation numbers.
Annual headline inflation had a slight uptick to 3.8 per cent from 3.6 per cent ahead of the Reserve Bank meeting to decide on interest rates next week.
Dr Chalmers said posting back-to-back budget surpluses and forecasting lower deficits had helped tame inflation in the past two years, as he acknowledged it was a global problem.
"We're seeing around the world, inflation's come off a lot," he told ABC Radio on Thursday.
"The last mile is more difficult than the rest of it and we got a bit of an indication of that in our own country."
International and domestic factors putting pressure on inflation - such as fruit and veg prices - were temporary, he said.
Shadow treasurer Angus Taylor said the opposition would have cut $45 billion of measures from the budget including some union grants and tax-cuts advertising.
This would have saved $18 billion in associated interest payments, he claimed.
"What you have to do if you want to beat inflation is make sure the economy grows faster than your spending," he told ABC Radio.
