At Edgars Road bakery in Melbourne’s north, Berkay Iris is counting change. An elderly woman has sprawled coins across the counter. Without having to ask he picks out her order. It’s old-school service: Iris knows everyone by name, what they’re getting and how their families are.
He says everyone is talking about the cost-of-living crisis. He works at the bakery several days a week and, while most customers are still getting their usual orders, some are occasionally skipping on sweets.
“Everything’s going up and nothing’s going down,” Iris says.
The increase in the cost of everything – from flour to electricity – has meant entering a difficult dance with their customers.
Like a lot of small businesses, they’re at the coal face of the crisis, losing money to expensive overheads, but if they pass them all on their customers will desert them for the bigger players.
Iris says the worst thing they could do at the moment is surprise people.
“We’re trying to space them out,” he says. “So it’s not like one day the bread is $3.50, the next it’s $4.”
Edgars Road bakery sits inside a small shopping centre in Thomastown. The area already had a high mortgage stress rate of 65.4% and it will be even higher with recent rate rises. The council recently revealed it needs 34,000 affordable homes to match demand.
Next to the bakery sits a fish and chip shop, which Sam Yongquan and his mum have run since 2020.
Since they took over the store the price of mince meat has almost doubled, a box of eggs has gone up from $45 to $70, and fish has risen from $17 a kilo to $28.
They’ve increased their prices – a piece of fish has gone up from $6.15 to $7.00 – but they’re still losing about $500 a week in revenue.
In another trend he has noticed, more people are coming into the shop looking for work.
“A lot of people can’t find a job,” Yongquan says.
At the IGA next door the manager, Peter, who does not want his last name used, says they have only seen an increase in one thing – theft. “It’s quieter and there’s a lot of theft. It’s got to that,” he says.
Customers are spending less on meats and sweets and the biggest seller now is things on special.
Luke Achterstraat, chief executive of the Council of Small Business Organisations Australia, says this week’s interest rate pause by the Reserve Bank is welcome but “not an improvement” for the many members now in “survival mode”.
Rents, energy costs and premiums are also soaring, and the RBA may not be finished lifting borrowing costs. Many firms have no choice but to borrow at interest rates above 10%, often secured by mortgages at much lower rates.
Pay rises of 5.75%, plus another 0.5% for super, are also kicking in this week for those on 122 different industry awards.
It’s not just red meat and takeaway that people are cutting back on. Down the road in Preston, Rob Price runs Raccoon bar.
Their house pint is still $10 – almost unheard of in the north now, but they’ve still noticed the number of patrons slow down.
“People are just coming in a little less frequently,” Price says. “I think a combination of factors: a) a Covid hangover, b) less money and c) health reasons.
“A lot of places will go to the wall over the next 12 months – it’ll be from a combination of landlords not understanding the situation and our customers paying higher interest rates.”
On top of this, many small business operators are worried about their own mortgages. In Lalor, Lulu and Ahmed Khalil run a Lebanese bakery. Lulu says they have lost a few customers recently because people are eating out less.
“They can’t afford it,” Lulu says. “Most of them have families. If you want a pie for example, we used to sell them for $4 and now it’s up to $5. It’s had a big impact on our business.”
The Khalils have four children and have had to cut back on their own spending. “Our interest rates are through the roof,” she says. “It’s just a matter of making ends meet now.”
But it’s her mother, who is on a pension and has had to cut back on everything, that she really worries about.
“I just wish there was more help,” Lulu says. “I wish they could just have some availability of support for the ones that are struggling.”
Sandy Chong, chief executive and a director of the Australian Hairdressing Council, who runs Suki Hairdressing in Newcastle, says clients are spacing out their visits and last-minute Covid and flu cancellations are becoming a big issue.
Increasing wages are also a problem for small businesses owners, she says.
“As for running a business, every interest rate rise hurts all of us ….every supplier rise in costs means we pay more and more. Again, small business owners are looking at getting out of commercial premises and opening in hybrid spaces or working in a home salon.”
