‘Looking like a rough start’: SMEs set to feel the pinch as CPI spikes
Following last week’s spike in December inflation data, economists are warning small businesses to brace themselves to feel the impact.
.
Last 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.
Additionally, core inflation rose 3.3 per cent in the 12 months to the December 2025 quarter, which 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.
David Alexander, ACCI chief of policy and advocacy, said 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,” he said.
“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.”
Alexander noted ACCI would continue to bolster its position of budget repair by getting public spending down to 25 per cent of GDP.
This was pushed by ACCI as the organisation believed fiscal discipline would 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,” Alexander said.
“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 reforms in these areas.”
From the ABS data, it was noted that the largest contributors to annual inflation over the last 12 months were housing up 5.5 per cent, food and non-alcoholic beverages up 3.4 per cent and recreation and culture up 4.4 per cent.
Ian Boyd, GoCardless general manager ANZ, echoed the concern towards small businesses, dubbing it “certainly not good news” for them.
Boyd said while many were hoping 2026 would be the year business could get back on track, it was looking like a rough start.
According to a Pursuing Payments report, more than one in four Australian business owners and decision makers had considered increasing the cost of their product or service to alleviate the impact of late payments on cash flow.
Boyd said with sustained inflation still to contend with, it would “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.”
02 February 2026
Imogen Wilson
accountantsdaily.com.au
