New data from MYOB reveals that small businesses are experiencing what is called a spending ‘cold snap’ with cash and EFT deposits on a decline since June this year.
The data has highlighted that cash deposits have declined since June compared with the first half of 2023, while previous years (2021 and 2022) saw cash deposit rates increase steadily as those years progresses.
Furthermore, EFT deposits, a marker of health for consumer-facing businesses such as retail or hospitality, are flat compared to the growth trajectory seen in 2022.
This data has suggested that interest rate changes are hitting small businesses in ways not commonly measured and the impacts of a tightening on consumer spending are starting to take a toll.
“When we look at 2022 data, in each month that interest rates went up we can see a clear dip in spending across the days following the interest rate decision before it then picks back up for the rest of the month,” Emma Fawcett, MYOB General Manager of SME, commented. “However, in 2023, we can see the delayed impact cost of living, interest rate increases and inflation is having on small businesses.”
“As we head into the Christmas season, we are concerned this trend will continue and SMEs will struggle to hit their sales targets for a usually very busy period,” Fawcett added. “We are concerned about the effects any potential interest rates over the next few months will have, adding strain to an already flattening sector. This will have a direct impact on business preparedness and confidence as we head into 2024.
“We are encouraging everyone to shop local, even if you can’t spend as much as in previous years. Small businesses are the lifeblood of Australia’s economy and if they are struggling, the whole economy will be struggling in the months ahead,” Fawcett concluded.
