Fuel costs, housing shortages and hiring struggles are converging on regional Australia, according to a new COSBOA and CommBank-backed report.
Regional Australian small businesses are under sustained financial and operational strain, according to new research from the Council of Small Business Organisations Australia (COSBOA), released with support from CommBank.
The 2026 Small Business Perspectives Report is COSBOA’s fifth annual study and its first to focus exclusively on regional, rural and remote businesses, drawing on independent research conducted by Survey Matters.
The numbers paint a stark picture. Eighty seven percent of regional small businesses reported that operating expenses had increased over the past year, while 73% said profit had fallen. Only 18% expect profit to improve over the next 12 months, and just 7% believe expenses will actually decrease.
Hiring gets harder
Workforce shortages compound the cost pressure. Of businesses that tried to recruit, 87% experienced difficulty filling roles, with shortages persisting across skilled trades and specialist occupations. Housing adds another layer, with 52% of business owners rating housing access in their community as poor, a factor directly affecting their ability to attract and keep workers. Fuel costs were named a significant or critical pressure by 37% of respondents, while a quarter pointed to regulation and compliance as one of their biggest burdens.
The toll isn’t only financial. Seventy seven percent of business owners reported experiencing business-related stress or anxiety over the past year.
COSBOA CEO Skye Cappuccio said the findings reflect challenges that go well beyond the numbers on a balance sheet. “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 the pressure, Cappuccio said business owners aren’t giving up on growth. “What is encouraging is that regional businesses haven’t stopped looking ahead. 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.”
CommBank’s Executive General Manager for Small Business, Rebecca Warren, said the findings match what the bank hears directly from regional customers. “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 said. “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.”
The human toll
Cappuccio framed the report as more than a diagnosis, arguing it offers direction for policymakers. “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 said. “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.”
The findings are set to feed into discussions at the 2026 COSBOA National Small Business Summit, where regional Australia will be a central focus, bringing together policymakers, industry leaders and small business representatives to examine what policy changes might ease the pressure the report describes.
The 2026 Small Business Perspectives Report is available at: https://cosboa.org.au/post/regional-small-businesses-under-pressure-as-costs-workforce-shortages-and-service-gaps-deepen/
Keep up to date with our stories on LinkedIn, Twitter, Facebook and Instagram.