WHAT COULD GOVERNMENT BE DOING TO HELP AUSTRALIA'S EMBATTLED HOSPITALITY INDUSTRY?

Australia's hospitality industry is at a breaking point. Over 1,900 hospitality businesses went under last financial year, and experts predict that one in eleven could collapse in the year ahead. The rising cost of living, driven by inflation and exacerbated by energy and rent increases, has reduced disposable income for millions of Australians, cutting into consumer spending at cafes and restaurants.

WHAT'S THE CAUSE?

INTEREST RATES? Sure, they’re robbing spending money from the pockets of everyday Australians. But what caused the interest rate hikes? INFLATION? The Reserve Bank's solution to curb inflation has been to aggressively increase interest rates. So, if interest rates are simply the symptom, isn’t inflation the real villain here? But who is responsible for inflation? GOVERNMENT POLICY? While it’s complex and difficult to nail down all the factors behind rising inflation, one thing is clear: government policy plays a significant role. It’s the government we look to for prudent formulating and executing of good economic policy. Not spending without corresponding productivity gains.

Should we hold the government accountable for the current situation? I’d argue they carry a large weight of the responsibility.

WHAT CAN GOVERNMENTS DO TO GIVE CAFE & RESTAURANT OWNERS THE SUPPORT THEY URGENTLY NEED?

So, what can be done to provide the hospitality industry with the support it desperately needs? Make no mistake, we appreciate government in this country. Whatever political leaning, we live in a country that has been strong, prosperous and good for all of us at so many levels. But in a time of crisis should authorities step in to make a meaningful difference? Here's some thoughts...

1. Remove Payroll Tax for a Year?

One immediate action that would offer significant relief is the removal or reduction of payroll tax for a temporary period. Payroll tax places a substantial burden on small hospitality businesses, many of which are already struggling to retain staff. By suspending payroll tax for a year, governments could allow business owners to keep their teams intact, avoid job cuts, and perhaps prevent more closures. This would provide immediate financial relief without burdening the businesses with more debt or taxes.

2. Reintroduce Instant Asset Write-Off To More Businesses?

One of the most practical tools that governments could reintroduce to aid the hospitality industry is the instant asset write-off scheme. This policy allows businesses to immediately deduct the cost of eligible assets, reducing their tax burden and encouraging investment in infrastructure and technology that could make them more efficient. For café and restaurant owners, investing in upgraded equipment, kitchen technologies, or even environmentally sustainable solutions could make a difference in profitability. Without the financial weight of upfront costs, businesses could boost their efficiency and productivity, positioning themselves for future growth.

3. Cut Red Tape?

Regulations, compliance requirements, and paperwork often slow down small businesses. For many café and restaurant owners, navigating the maze of licenses, permits, and bureaucratic processes eats into time that could be spent serving customers or improving operations. Governments at all levels—especially local councils—can make a significant difference by simplifying processes and cutting red tape. Streamlining licensing, reducing compliance burdens, and simplifying taxation reporting could free up valuable resources for hospitality owners, helping them focus on their core business rather than being bogged down by administration.

4. ATO Could Show Leniency Chasing Outstanding Debts?

With many café and restaurant owners already feeling the pinch, an additional financial strain comes from the Australian Tax Office (ATO) current focus on collecting overdue tax debts. While it’s important that tax debts are eventually repaid, the ATO could offer struggling businesses temporary relief by halting the pursuit of outstanding debts for a specified period. This could allow small businesses to regain their financial footing without the constant pressure of looming tax debts that would push them into liquidation. By delaying enforcement actions, the ATO would give business owners some much-needed breathing space to manage their cash flow effectively.

5. Interest Rate Relief?

Interest rates have become the central battleground in the cost-of-living crisis. Consumers are tightening their belts as mortgage repayments eat into their disposable income, leaving less to spend at cafes and restaurants. In the face of this, interest rate relief would be one of the most powerful tools to reignite consumer demand. Lowering interest rates would mean more disposable income in the hands of Australians, leading to more spending on dining out and entertainment—directly benefiting hospitality businesses. Moreover, lower interest rates would also reduce borrowing costs for small businesses, making credit more accessible and affordable. But, as we know, we can't lower interest rates at the expense of another spike in inflation...

6. Energy Costs: Bringing Relief to Soaring Bills?

A major burden on café owners is the soaring energy costs—electricity and gas bills that seem to grow higher every month. Government policy, particularly at the state and federal levels, has had a direct impact on energy prices. While transitioning to clean energy is necessary for the future, the process has left many small businesses bearing the brunt of higher prices due to infrastructure gaps. State governments need to balance this transition with a realistic view of the short term effects of turning off current energy sources on everyone. Targeted subsidies or energy grants to help small businesses survive. Energy rebates or temporary subsidies for high-use periods would alleviate some of the pressures café owners are feeling from their monthly P&L statements.

7. Rent Relief: A Fixed Cost that Can't Be Escaped?

Rent increases are relentless. This is another massive expense for hospitality businesses. Many cafes are tied into long-term leases in prime locations where foot traffic was once the key to success. However, in the current climate, high rents have become unsustainable. Unlike many other costs, rent isn’t something a café can cut back on. Moving to a cheaper location isn't feasible for most businesses that rely on loyal customer bases and established locations.

This is where state governments and local councils could step in with rent relief programs. Offering temporary rent freezes, encouraging landlords to provide relief, or even subsidizing rental costs could make a significant difference. Additionally, reviewing zoning laws and offering incentives for landlords to reduce rents would help ensure that cafés don’t buckle under the pressure of high fixed costs.

8. Targeted Grants and Subsidies?

At all levels—federal, state, and local—governments should consider offering targeted grants and subsidies for hospitality businesses hit hardest by inflation, high energy costs, and decreased consumer spending. This could come in the form of rent subsidies, energy cost grants, or even specific funds aimed at helping businesses modernize and adapt to the current economic environment. These grants could be crucial in covering essential costs like rent, utilities, and payroll, helping businesses stay afloat during this difficult time.

9. Challenge Current Policy?

A good, hard look at our current policy. What's working and what's not? What's making it more difficult for small business and what's making it easier? Small business forms the backbone of our economy and our everyday life. Its upon government to make good laws and policy that encourages small business, encourages employment, encourages investment and rewards the passion and endeavour that our hospitality entrepreneurs put into every day of their lives.

CONCLUSION: GOVERNMENT SUPPORT IS VITAL

Australia's hospitality industry is a vital part of the economy and community life, but it is facing one of the most challenging times in its history. Rising inflation, energy costs, and high rents are eroding profits and driving small businesses to the wall. Governments at all levels must act to ensure that the sector not only survives but thrives in the future. Without decisive action, we risk losing a critical part of what makes our cities and communities so vibrant.

By addressing these urgent issues, governments can give café and restaurant owners the support they need to navigate this storm and continue serving the communities that depend on them.

LET'S HEAR YOUR THOUGHTS

I would love to hear your thoughts on this topic? What have I missed? Be free to comment below.