FEAR & GREED | Business News Q+A: Where SMEs are feeling the squeeze
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Dec 16, 2025 Ivan Colquhoun, Chief Economist at CreditorWatch, dives into the challenges facing Australia's SMEs due to rising costs and tighter cash flow. He reveals that capital cities like Sydney and Melbourne are feeling the pinch more than regional areas, which benefit from lower rents and established businesses. Ivan discusses how the cost of living impacts business expenses and differentiates SMEs from larger firms, highlighting their vulnerability. He provides an outlook for insolvencies, suggesting they may plateau, influenced by economic factors.
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SMEs Under Prolonged Cost And Rate Pressure
- Small and medium businesses have faced heavy pressure for 12–18 months from rising interest rates and higher operating costs.
- Costs that hit consumers also raise the cost of doing business, squeezing SME cash flow and resilience.
Cities Face Higher SME Failure Rates
- Capital city SMEs face higher failure rates due to higher rents, mortgages and tougher competition than regional businesses.
- Established regional businesses and lower competition often give them more stability than big-city counterparts.
Regional Economies Change The Risk Picture
- State-by-state outcomes differ: Western Australia and South Australia have outperformed due to stronger local growth and commodity tailwinds.
- Population growth and regional economic strength materially influence local SME resilience.