Fresh data showing inflation growth over the September quarter comes as no surprise to small businesses across Australia, which are torn between raising prices and laying off staff, or offering special deals to customers also struggling to keep up with the cost of living.
Consumer Price Index (CPI) data released by the Australian Bureau of Statistics (ABS) on Wednesday shows headline inflation grew 1.2% over the quarter, a rogue uptick after two consecutive quarters of slowing CPI growth.
The figure confounds hopes that previous interest rate hikes will bring the annual inflation rate back to the Reserve Bank of Australia’s target band, and suggests yet another interest rate bump is on the horizon.
Yet businesses on the ground say the inflationary data is no shock, given the cost pressures they are facing on a daily basis — and the measures they are taking to mitigate their exposure to the cost of living crisis.
Pride of our Footscray, a cocktail bar nestled in Melbourne’s west, on Thursday announced cut-price and free ‘IOU’ tickets to its regular roster of regular bingo, trivia, and stand-up comedy nights.
The decision to offer ‘financial hardship’ tickets was directly influenced by surging inflation and the toll of interest rates, said Mat O’Keefe, ‘chief bar officer’ and operator.
“People are barely able to pay their mortgage, or their rent, or their food, so it’s just incredibly serious,” O’Keefe told SmartCompany.
“We’re just a small entertainment venue. So there’s not much we can do other than what we’ve tried to do today: if you’re invited out to a friend’s birthday, and they can’t afford it, which is just happening a lot, you can get a free ticket to go on this occasion.”
The measure is intended to support the local LGBTQI+ community which sees Pride of our Footscray as an important meeting place, he added.
But behind the scenes, inflation is also taking a significant toll on the business — and its neighbours.
O’Keefe says the most pressing inflationary pressure is felt through rising public liability insurance costs, with the business’ premiums rising exponentially in recent years.
Pride of our Footscray this year made several staff redundant earlier this year to cope with some of those cost pressures.
More recently, it has replaced some of its brand-name liquor with more affordable alternatives, in an effort to maintain the retail price of its long-running drink specials.
O’Keefe is determined to keep the bar running but says many neighbouring ventures have not been able to keep the lights on through 2023.
“The whole area is being ruined by this inflation, because all of the expenses for the businesses have gone through the roof.
“At the same time, people just have no ability… They want to go out to these places, these are very good places. It’s very very good places.
“And they want to be able to go out, but they’re underwater with their mortgage, or their rent.”
Australian Natural Soap Company, a boutique producer based in Victoria’s Dandenong region, is trying to strike the same balance between meeting business costs and offering affordable options to customers.
Founder Emma Cook says raw ingredients for the company’s soap, along with electricity and freight, have all surged in cost.
Like other small businesses, Australian Natural Soap Company also made the hard decision to reduce its headcount through the tumultuous economic period.
Other efforts to mitigate price fluctuations include stocking up on raw materials in bulk, where possible, even if it ties up more of the business’ cash in its inventory.
“Freight is our biggest bugbear when it comes to rising costs as it feels to us like it is going up every couple of months,” she said.
“We are always trying to negotiate better deals and have also cut back on a lot of shipping incentives for our customers.”
Fortunately for the business, soap bars are something households themselves can stock up on, meaning some buyers are taking advantage of online promotions.
The business’ clearance webpage is now one of its most-visited, Cook added, with any items uploaded selling out rapidly.
“We’ve been running a Spend & Save offer on our website for the whole month of October but in the last few days, our sales have gone wild because we are only now in an official sales period,” she said.
Inflationary pressures are also being felt by small businesses in the regions.
Chris Jahnke is the CEO of Charley’s Chocolate Factory, a boutique chocolate producer and tourism hotspot in Mission Beach, Queensland.
In recent months, chocolate makers have been hit by rising sugar cane prices and shipping costs, which have spiked in line with fuel prices.
Now, Charley’s is joining other specialty businesses in raising its prices.
“Obviously the cost needs to be passed on, and that’s what we’re doing,” Jahnke told SmartCompany.
“We’re having to pass those costs on, because we just cannot continue to absorb those input costs.”
Given a broader expectation that the price of just about everything is set to surge, the business’ customers appear to understand the need to spend a bit more per chocolate bar.
“It’s not coming as a surprise to people, so that’s just how it is,” he said. “Obviously all that feeds into the overall inflation picture, but there we are.”
The business is highly exposed to the tourism market through its on-site tours and many of its stockists, which include the Cairns airport.
For now, the post-lockdown bump in domestic travel is making up the gap left by international tourism, which is yet to return to its pre-pandemic peak, Jahnke said.
That is despite inflation in the domestic travel and accommodation sector growing 7.3% in the year to September, outpacing annual CPI readings by nearly 2%.
Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
Comments