SMEs to feel the pinch as CPI spikes

Following December’s spike in inflation & the recent rise to interest rates, economists are warning small businesses to brace themselves to feel the impact.

On Wednesday 28 January, the Australian Bureau of Statistics (ABS) released the headline CPI figure, which came in “hotter than expected,” having increased by 3.8 per cent over the year to December 2025.

This exceeded the RBA’s forecast of 3.2 per cent and indicated price pressures would likely continue longer than expected.

Following the release of the data, economists and business leaders warned that this would not only negatively impact homeowners but also small business owners, who continue to tackle tough economic conditions.

Just like households, businesses were also experiencing the pinch of high costs. The cost of doing business is high, and the elevated inflation level has been contributing to elevated interest rates.

One of the key fixable elements of high inflation is to reduce government spending and bring the budget under control. The extended period of elevated inflation has presented significant challenges for businesses. This will continue if drastic action is not taken.

Fiscal discipline will always lessen pressure on inflation and interest rates, as well as energy costs.

With energy a major input into most businesses’ operations, rising energy costs are impacting the costs of doing business. Similarly, rising labour costs are contributing to strong growth in the cost of providing services for many businesses.

Costs for business have been high, and businesses have few alternatives but to pass these costs on to their customers. The high energy and labour costs impacting on businesses further underlines the need for major reforms in these areas.

While many were hoping 2026 would be the year business could get back on track, it was looking like a rough start.

With sustained inflation still to contend with, it’s likely to “hit the back pocket of consumers hard”.

For businesses, the only way forward is maintaining the controllable; tighten up payment stacks, reduce the impact of late payments on the bottom line, and reduce admin hours so you can focus on the things that really matter.

For consumers, it might no longer be a question of where you spend, but how. Even small things like surcharges and dishonour fees can make an impact on the bank balance, so it might be time to take a closer look at how you’re paying and see if there’s a better offer out there.