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Small business ‘dying from a thousand cuts to consumer spending’


High street data from MYOB suggests every rate increase comes with a sharp downturn in purchases and Christmas is critical.

By Philip King 10 minute read

Short, sharp shocks to consumer spending in the wake of interest rate rises have left high street stores dying from a thousand cuts and another RBA increase before Christmas could leave them floundering, says MYOB.

It said data from its customer base showed each rate increase sent small business bank and EFT deposits spiking south and the net result was a downward graph.

“From June, cash deposits have started to decline compared with the first half of 2023 while previous years have seen cash deposit rates increase steadily as the year progresses,” MYOB said.

“Additionally, 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 suggests 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.”

MYOB general manager of SMEs Emma Fawcett said the effect of each spending dip was adding up.

“Small businesses just don’t have the cash deposits or the EFT deposits after an interest rate rise that they do the rest of the time. Overall the trend is flat for deposits and trending down for EFTs.”

“So businesses are not faring as well in 2023 as they have through 2021–22. Some of them are starting to do it tough and overall we’re seeing these declining trends and also a slight lowering in savings balances.”

She said another rate rise would be too much for some retailers and hospitality businesses.

“I worry about another interest rate rise on consumer spending patterns and the knock-on to small businesses. I think it could have a really far-reaching impact. “As we all know, when small business struggles the whole economy struggles – they really are the lifeblood of the economy.”

Her own experience suggested consumers were making last-minute decisions to cut back.

“A local restaurant that is a MYOB customer posted on their Facebook on Saturday night saying they’d had 22 cancellations over the weekend. They’re asking the local community to please support us through these tough times but if you booked please don’t cancel on the day because we bought food.”

She said a rate rise before Christmas could spell disaster for many SMEs.

“If this trend continues, we are worried that SMEs are going to struggle to hit their sales targets for what’s usually a really peak period for them.

“If they’re not closely monitoring their business trends they might order stock or bring stock in expecting a busy Christmas that doesn’t eventuate and then they’ve got cash outflows without the money coming in, which could lead to a lot of discounts to move the stock early next year.”

“We probably will see a spike but we’re concerned it won’t be the same as it was in December last year. If interest rates go up again in December, a lot of consumers will reconsider what they were going to spend heading into Christmas.”

“We are encouraging everyone to shop local, even if you can’t spend as much as in previous years.”

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Philip King

Philip King


Philip King is editor of Accountants Daily and SMSF Adviser, the leading sources of news, insight, and educational content for professionals in the accounting and SMSF sectors.

Philip joined the titles in March 2022 and brings extensive experience from a variety of roles at The Australian national broadsheet daily, most recently as motoring editor. His background also takes in spells on diverse consumer and trade magazines.

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