Regional Small Businesses Facing Rising Costs, Workforce Shortages And Service Gaps, New COSBOA and CommBank Report Finds

Almost nine in ten regional small businesses report that their expenses have increased over the past year, while nearly three-quarters say profitability has declined, according to a new national report from the Council of Small Business Organisations Australia (COSBOA).

The 2026 Small Business Perspectives Report, sponsored by CommBank and independently conducted by Survey Matters, is COSBOA’s fifth annual research report and the first to focus exclusively on regional, rural and remote Australia. The research draws on the experiences of 572 regional small business owners across the country.

The report found that 87 per cent of regional small businesses have seen expenses rise in the past 12 months, while 73 per cent reported a fall in profit. Only 18 per cent expressed optimism that profit would improve over the coming year, and just 7 per cent believe their business expenses will decrease.

Workforce And Housing Pressures

Recruitment remains a persistent challenge outside capital cities. Of the businesses surveyed that attempted to hire, 87 per cent experienced difficulty filling roles, with shortages concentrated in skilled trades and specialist occupations.

Housing is compounding the staffing problem. More than half of respondents (52 per cent) rated housing access in their community as poor, directly affecting their ability to attract and retain workers.

Fuel costs are also weighing on operators, with 37 per cent of businesses reporting that fuel is placing significant or critical financial pressure on their operations. A quarter of respondents identified regulation and compliance as one of the biggest pressures affecting their business.

The toll is not only financial. Some 77 per cent of business owners reported experiencing business-related stress or anxiety during the past 12 months.

‘They Are The Local Economy’

COSBOA CEO Skye Cappuccio described the findings as evidence that the challenges facing regional small businesses extend well beyond their balance sheets.

“Regional small businesses don’t just support local economies – in many communities, they are the local economy. When they come under pressure, the impact is felt across the entire community,” she commented.

“This research shows that where a business operates increasingly determines the challenges it faces. Regional businesses are managing higher operating costs while also dealing with housing shortages, workforce constraints and limited access to essential services – barriers many metropolitan businesses simply don’t experience to the same extent.”

Ms Cappuccio pointed to signs that regional operators are continuing to look for ways forward despite the pressures.

“Business owners continue to identify opportunities through service diversification, community engagement, domestic tourism and the selective adoption of AI and new technologies to improve productivity and customer service,” she noted. “But resilience should not be mistaken for capacity to absorb endless pressure. The ambition is there – the right policy settings now need to support it.”

CommBank Flags Regional Divide

CommBank Executive General Manager of Small Business Rebecca Warren acknowledged the gap between metropolitan and regional operating conditions.

“The report reflects the reality of running a small business in regional Australia today, where many business owners are making difficult decisions about investment, hiring and growth,” she observed.

“As a bank that supports more than one in four businesses in Australia, we know these challenges can often be more pronounced outside our major cities. Through our conversations with small business customers, we’re seeing how businesses are balancing day-to-day pressures with longer-term planning, while continuing to adapt and look for opportunities, even as economic conditions remain uncertain.”

Ms Warren added that CommBank continues to engage with customers on the support they need, whether around cash flow management or identifying opportunities to invest and grow.

“Small businesses in regional Australia help to shape the character and resilience of the towns and regions they serve. Their insights are important in informing future policy, investment and support for stronger regional economies, and this research helps ensure those voices are heard.”

Policy Roadmap Called For

Ms Cappuccio framed the report as a practical guide for government policy, calling for action on the cost of doing business, regulatory burden and investment in regional infrastructure.

“If we want stronger regional economies, we need policies that make it easier – not harder – for small businesses to invest, employ people and grow,” she urged. “Regional small businesses have shown they are prepared to adapt, but they cannot keep absorbing rising costs, workforce shortages and service gaps without the right support around them.”

“Reducing the cost of doing business, simplifying unnecessary regulation and investing in the housing, connectivity and essential services that underpin regional communities will help unlock the full potential of regional Australia.”

Summit To Follow

The findings from the 2026 report will feed into discussions at the 2026 COSBOA National Small Business Summit, where regional Australia is expected to be a major focus. The summit will bring together policymakers, industry leaders and small business representatives to examine the research and the policy settings needed to strengthen regional businesses and the communities they support.

The full report is available on the COSBOA website.

Last Updated on July 29, 2026 by Nick Ross