Regional small businesses are facing increasing cost pressures, workforce shortages and service gaps, raising concerns about their capacity to support local economies and supply chains.
New research from the Council of Small Business Organisations Australia (COSBOA) reveals housing shortages, infrastructure constraints and limited access to essential services compound these pressures.
Sponsored by CommBank and conducted independently by Survey Matters, the COSBOA 2026 Small Business Perspectives Report draws on the experiences of 572 small business owners across regional, rural and remote Australia.
COSBOA’s fifth annual report – and the first to focus exclusively on businesses in these communities – indicates that 87 percent of regional small businesses experienced an increase in expenses over the past year, while 73 percent reported declining profits.
Less than a fifth (18 percent) were optimistic that profitability would improve during the next 12 months, while just seven percent were optimistic that their expenses would fall.
Fuel is creating significant or critical financial pressure for 37 percent of respondents, reflecting the additional transport and logistics costs often faced by businesses operating across large distances.
Among businesses that attempted to recruit, 87 percent experienced difficulty filling roles, with shortages continuing across skilled trades and specialist occupations.
Housing availability is contributing to the problem, with over half (52 percent) of respondents rating access to housing in their communities as poor, directly affecting the ability of regional businesses to attract and retain workers.
Regulatory obligations are adding further pressure, with a quarter of businesses identifying regulation and compliance as one of their greatest challenges, pointing to the need for procurement processes that avoid placing unnecessary administrative burdens on small suppliers.
COSBOA CEO Skye Cappuccio said the difficulties regional businesses face have consequences extending far beyond individual operators.
“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 said.
“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.”
Despite these ongoing pressures, the report found that regional business owners continue to pursue new opportunities. However, Cappuccio warned that this adaptability should not be viewed as an unlimited ability to withstand conditions that continue to deteriorate.
“What is encouraging is that regional businesses haven’t stopped looking ahead,” she said.
“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.
“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.”
The strain is also affecting business owners personally, with over three-quarters (77 percent) reporting business-related stress or anxiety during the past year.
CommBank Executive General Manager, Small Business, Rebecca Warren said many regional operators were making difficult decisions about hiring, investment and growth while continuing to plan for the longer term.
“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,” she said.
“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.
“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.”
COSBOA is calling for measures that reduce the pressure on small businesses in regional communities.
“If we want stronger regional economies, we need policies that make it easier – not harder – for small businesses to invest, employ people and grow,” added Cappuccio.
“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.”
