Beautician Giulia Teaupa says she nearly closed her business when the most aggressive interest rate hikes in a generation nearly crippled her financially.
And she is one of the lucky ones: a record number of other businesses went bust in the last financial year, simply because customers couldn’t spend.
This nationwide business collapse is a worrying sign that Australia could be heading for a jobs apocalypse unless the situation improves.
Ms Teaupa, who runs Beautician Australia in the Sydney suburb of Miranda, was facing a cash flow problem as clients, suffering a cost-of-living crisis, were putting off procedures such as eyebrow tinting.
“It was very stressful. I didn’t know how long this period would last,” she told Daily Mail Australia.
The 39-year-old married mother of two, who employs three people, was on the verge of closing her business at the end of 2022, after six years, due to plummeting revenues.
“We’ve had Covid, I’ve had babies in between, we’ve been through some very difficult times,” she said.
‘There have actually been times where I’ve thought it would be better to just close the business, because definitely, as a business owner, sometimes you wonder: is it worth it?’
Giulia Teaupa, who runs Beautician Australia in Miranda, a Sydney suburb, came very close to insolvency because higher interest rates meant she had fewer clients.
But it was lucky to avoid bankruptcy despite more than 11,000 companies going bust in the last financial year – the highest number on record.
Ms Teaupa said it was a tough time as she struggled to pay rent on her shop in Sutherland Shire, Sydney.
“Those interest rate increases added a lot of pressure to our business as they changed our customers’ spending patterns, affecting our weekly income, worrying about paying bills and rent, straining our finances and ultimately crippling our cash flow,” he said.
‘When it comes to an organic well, it’s very scary, because you just don’t know when you’re going to come back up, or if you’re going to come back up.
‘That’s actually where most businesses close.
“And I’ve definitely had a couple of moments where I thought, ‘Oh my God, is this it now?'”
In fiscal year 2023-24, 11,049 companies were placed into external administration.
This represents an alarming milestone: it is the highest number of corporate failures since the Australian Securities and Investments Commission began collecting and publishing insolvency data in 1999.
Shadow treasurer Angus Taylor said local inflation and multi-employer dealings were to blame for the insolvency crisis.
“Small businesses are suffering due to rising energy costs, poor employment laws, escalating costs and excessive bureaucracy,” he told Daily Mail Australia.
“This is the result of a government with misguided priorities and no interest in Australian small businesses.”
But Labor says its $300 electricity rebates and revised stage three tax cuts would help small businesses.
“We know businesses are under pressure from higher interest rates and weak demand in our economy and we are doing something about it, with tax breaks and energy rebates for small businesses and tax cuts for all taxpayers,” a government spokesperson told Daily Mail Australia.
While the number of insolvencies reached a record high, the insolvency rate of 0.33 percent was still below the two-decade average of 0.43 percent.
Ms Teaupa was able to revive her business last year thanks to the aglow app, where salon clients can pay in installments rather than upfront.
This brings them back to their business, first established in 2016, and helps them plan their income stream for the next month.
Other retailers are relying on buy-now-pay-later apps to retain customers, and major banks don’t expect any interest rate relief until 2025.
Matthew Caddy, a partner at Melbourne-based restructuring firm McGrathNicol, said Covid supply constraints, higher labour costs and higher interest rates had made matters worse as businesses struggled to keep customers.
“Many of those issues still persist as a result of rising input costs, access to labour and delays,” he told Daily Mail Australia.
‘People don’t spend as much as usual.
“If you have a mortgage, no matter how big it is, your payments go up significantly and that has to impact somewhere.”
Construction firms are the biggest victims of the most aggressive interest rate rises in a generation: 12 of the 13 increases in 2022 and 2023 came under Prime Minister Anthony Albanese.
Builders account for more than a quarter of companies going bust, leaving Australia with a housing shortage after immigration levels last year rose well above 500,000 for the first time in history.
“There are significant risks in these contracts; many of them did not contemplate cost escalation,” Caddy said.
‘If we look at the costs of inputs for any construction, whether it be concrete, plaster or labour, they have all increased.
‘Typically, those costs can’t be passed on to developers; it’s a fixed-price contract.’
Then there are hospitality businesses, known as accommodation and food services, which account for one in six bankruptcies, and Australian Bureau of Statistics retail data shows trade was flat in June.
“When you go to a lot of restaurants these days, they’re pretty quiet,” Caddy said.
But they are far from the only companies in trouble: the steepest rate rises since the late 1980s caused retail trading to contract during the June quarter.
Economic growth is stagnating and rate hikes are tapering off to prevent annual inflation in June from rising to 3.8 percent, marking the first quarterly increase in two years.
Australian drinks brand Billson’s filed for voluntary administration last month after 159 years in business.
Husband and wife team Nathan and Felicity Cowan, who ran the historic brewery in Beechworth, north-east Victoria, are devastated by the collapse of the business founded in 1865.
Husband and wife team Nathan and Felicity Cowan, who ran the historic brewery in Beechworth, north-east Victoria, are devastated by the collapse of the business which was founded in 1865.
The pair blamed the decline in ready-to-drink canned vodka and craft beer on a sharp decline in consumer spending linked to high inflation and the government’s indexed excise tax on spirits.
“Over seven years, everyone’s hard work and passion has resulted in overwhelming support from people across Australia and some pretty incredible business growth,” they said.
“Unfortunately, that growth masked several mistakes we made along the way because our systems and processes failed to keep up.”
Bradley R. Holland, director of the Red Ranger Zoo and Conservation Park in Pinjarra, south of Perth, said his business was put into liquidation after struggling to attract visitors as Australians closed their wallets amid the cost of living crisis.
“Look at what we’re all going through – we’re going through an interest rate crisis,” he told Daily Mail Australia.
‘Things like eating out or going to the zoo are luxuries.
‘People are struggling to pay their mortgages and put food on the table, or if they live in a rental, they are struggling to pay the rent.’
Bradley R. Holland, manager of the Red Ranger Zoo and Conservation Park at Pinjarra, south of Perth, was one of more than 11,000 businesses that went bust in the last financial year, the highest number ever recorded.
Mr Holland, who also pays rent to run a business, said his own clients had told him visiting his zoo near Mandurah was financially challenging enough.
“You just have to talk to the average person on the street,” he said.
“It’s really scary because it limits cash flow.”
Red Ranger Zoo and Conservation Park ceased operations on 18 June when it was placed into voluntary administration, before entering liquidation on 9 July.
The zoo now operates under the same name but through a new parent company, Red’s Productions, which is run by Mr Holland.
