Cafes and restaurants across Australia collapsed at their fastest rate in the entire past financial year, new data has revealed, in a grim reflection of the state of the embattled sector.
As consumers move away from discretionary shopping, the day-to-day costs of running a diner, including those related to food and energy, have skyrocketed, as have interest rates, pushing the popular business to collapse.
According to the Australian Securities and Investments Commission (ASIC), cafes, restaurants and small retailers registered a disproportionate increase in bankruptcy appointments in the 12 months to June 30 this year.
The number of food service collapses rose 50 percent to a record 1,667, compared to the previous high of 1,114 in fiscal 2023.
At the same time, insolvency appointments in retail trade increased by 42.2 percent to 768.
Restaurants and Catering Australia CEO Suresh Manikman said it was one of the toughest periods the sector had ever faced.
“Higher interest rates, pressure on the cost of living, more expensive products and the cost of energy are all having an impact,” Mr Manikman said. Australian.
“Compared to last year, people have less money in their pockets and less ability to pay and go out, and that's the challenge facing the sector.”
The Australian Bureau of Statistics (ABS) recently showed that monthly household spending on hotels, cafes and restaurants fell by 13 per cent from the end of 2023, slightly ahead of the broader fall in spending.
Earlier this month, credit reporting company CreditorWatch predicted that 9.1 percent of businesses in the industry would fail over the next year amid warnings that the Reserve Bank may be forced to keep interest rates high for longer to get inflation under control.
“Businesses are having to endure high interest rates long after consumer demand has fallen sharply and discretionary spending has weakened significantly,” said CreditorWatch Chief Economist Anneke Thompson. Sydney Morning Heraldcalling the situation a “perfect storm.”
Independent Food Distributors Australia chief executive Richard Forbes also warned that customers could expect to pay significantly more for food and drink unless action was taken to tackle rising business costs.
Distributors have experienced a 30 per cent increase in the cost of food over the past three years, he told news.com.au, which is then reflected in consumer bills. Bills for rent, insurance, gas and electricity also go up.
“On average, our members face electricity bills of $25,000 a month – not a year, but a month,” Mr Forbes said.
“All these costs must be covered. And at the end of the day, when you have rising energy costs, insurance, rent, fuel, and labor costs from the beginning to the end of the supply chain, then the people who pay more for their coffee, their slice of carrot cake, their restaurant meal, their the parmigiano in the pub is the consumers.”
Mr Forbes stressed that coffee shops were not to blame for the price hikes, as businesses were simply trying to survive in an “unviable environment”.
“They are not raising prices because they want to make money,” he said.
“They raise the prices of their products just to survive, it's simple. And if we don't see the relief we need, the prices of everyday household goods are just going to go up.”
Mr Forbes said state and federal governments needed to take urgent action to improve working conditions for businesses.
“(The government) recognizes that small businesses, which make up 97 percent of all businesses, are the engine of our economy, so the government needs to follow suit. We need cheaper energy, and we need it now.”
U Australian today Mr Manik also called on the government to invest in apprentices and trainees to ensure industry has access to skilled staff.
