Restaurants and other small businesses in the hospitality industry are particularly vulnerable to economic and geopolitical instability. Job losses during the pandemic totalled 272,816, making it the hardest-hit industry of all.  

Rising costs further threaten stability. While various sources indicate that consumers are still prioritising travel after being restricted during the pandemic, consumer spending is changing due to the cost of living crisis, with locals potentially being less likely to spend money on dining out and other non-essentials.  

With that in mind, there is still a great deal of uncertainty ahead, especially for small businesses. 

In addition, Warren Hogan, previous Treasury economist, believes there is a 50% chance of recession in Australia next year – however, he also predicts a strong recovery. 

With all of these ominous factors in mind, small businesses owners were awaiting some good news about Australia’s federal budget in the hopes it may improve the industry outlook. When the budget was announced on 25th October, many were disappointed. 

While the proposed changes may be a good step, it is not good enough in the eyes of many business owners, as well as the voice of the industry themselves: Restaurant & Catering Australia (R&CA). 

R&CA CEO, Ms Belinda Clarke, expressed doubts about the impact the budgetary allocations will have on the industry in light of rising costs, as well as the introduction of “red tape and counterproductive policy”.   

What Are the Challenges Facing the Hospitality Industry Today? 

“The Budget handed down tonight makes a lot of big promises in terms of bringing people back to workforce and supporting them staying there. However, there are still unaddressed concerns about the rising costs of doing business in this country”. 

– Ms. Belinda Clarke 

Workforce Shortages 

Perhaps the greatest concern is the lack of skilled and available staff in the country at the moment. A prominent factor contributing to this shortage is the restrictions pertaining to visas. Working holidaymakers are vital for the workforce and filled 250,000 jobs before the pandemic.  

With 102,000 open vacancies at the moment, making it easier for international workers to come to the country would potentially do a lot to remedy the situation.  

How the Federal Budget Addresses Workforce Shortages  

Thankfully, a few promises have been made in order to address this issue in particular: 

  • A 30% increase in country caps in 2022-2023 for working holidaymakers. 
  • The Permanent Migration Program will expand to 195,000, an increase of 35,000 places.  
  • $36.1 million to accelerate visa processing times 
  • $60 million to increase international tourist arrivals from new international markets 

Restrictions on International Student Working Hours 

Another factor contributing to the shortage was a cap on international students’ working hours. However, these restrictions will be relaxed until 30th June 2023 for student and secondary training visa holders and they will be able to work in any sector. 

What Else Has the Government Promised in the Federal Budget? 

Pay-As-You-Go Tax Tweaks 

Part of the $800 million Small Business and Sole Trader package pertains to adjustments in PAYG tax payments that will help small business avoid penalties for underpayments and improve cash flow.  

According to the government, these changes will help 2.3 million small business; however, new legislation will need to be passed after the elections in May in order for these changes to come into place. 

Investment in the Thrive 2030 Strategy 

$6.8 million has been allocated for the implementation of the THRIVE 2030 strategy for tourism recovery. The strategy aims to address challenges caused by COVID-19 as well as pre-existing issues affecting the industry and consists of three phases: 

  • The recovery phase (2022-2024) which aims to rebuild the visitor economy by addressing the most pressing issues, such as workforce shortages. 
  • The consolidation phase (2025-2027) which aims to achieve consistent growth through continuing to improve workforce capabilities, overall business practise, and pursue new markets. 
  • The acceleration phase (2028-2030) which aims to speed up growth by building on the previous phases and improving technologies. 

$4.8 million will be used to help Tourism Research Australia to collect and analyse more data that will help businesses in the visitor economy to make more accurate decisions. The remaining $2 million will be used to implement an online employment and skills platform for the visitor economy. 

Extending Mental Health and Financial Counselling Programmes 

A total of $15.1 million will be spent to extend the small business mental health and financial counselling programmes, the Small Business Debt Helpline and NewAccess for Small Business Owners. 

The Small Business Debt Helpline is a free service for business owners experiencing financial difficulties. The helpline provides information on applying for government grants and disaster relief, as well as advice on paying bills, loan repayments, and bankruptcy and insolvency. 

In addition, they provide advice on personal finance for business owners and can direct people to mental health support services.   

NewAccess for Small Business Owners is a guided mental health coaching program that helps with stress management, problem solving strategies geared to reduce overwhelm, and other coping strategies.   

Their programmes were said to have made a big difference for many businesses that suffered due to the pandemic. 

Energy Grants 

$62.6 million will be available as grants for supporting small to medium sized businesses in order to reduce energy usage and improve energy efficiency. These grants will be available over the next three years. 

Addressing Skills Gaps  

Digital and Skills Tax Boost for Small Businesses 

There will be $1.6 billion in tax relief for business with an annual turnover below $50 million in order to assist them in upskilling their staff.  

The Technology Investment Boost is geared towards increasing digital uptake within small businesses, while the Skills and Training Boost is designed to attract and retain skilled workers as well as upskill them. 

Jobs and Skills Australia 

In addition to the funding mentioned above, the government have also promised to address workforce and skills shortages by setting up Jobs and Skills Australia, which has plans to research skills gaps in and address them using various strategies. 

Minister for Skills and Training Brendan O’Connor said:   

“Australia is facing its most significant skill shortage in decades, exacerbated by COVID-19 and 10 long years of policy neglect. To provide greater opportunity for Australians to have secure and rewarding employment we must be able to skill and reskill our workforce. 

“Whether it’s in the care sector, agriculture, hospitality and tourism, construction, technology, or a need for sovereign capability in manufacturing, we need to deliver these skills at a time of acute skills shortages.” 

In addition to the above, they intend to develop an Australian Skills guarantee which helps apprentices access opportunities. 

Small Business Owners Are Not Convinced 

While the proposed changes are promising to an extent, many feel that it is not enough. On top of the workforce challenges, the industry is still recovering from the pandemic and the density restrictions involved, and there is additional red tape that need addressing. 

Concerns voiced by R&CA include the following: 

  • Re-introducing restrictions on working hours for student and secondary training visa holders on 30th June 2023 
  • The introduction of the mandatory Country of Original Labelling scheme for seafood. This will give businesses more administrative work and additional expenses. 
  • Changes to multi-employer bargaining and workplace relations that will work in favour of big businesses and unions at the expense of small businesses. 

CEO of the Australian Hotel Association, Stephen Ferguson, has echoed some of these concerns, stating that a lack of changes to the Fringe Benefits Tax was unfair and favours big businesses. 

Some small business owners feel that their most pressing concerns are not being addressed and would like there to be more leniency with loan repayments, for example. Others would like to see an extension of the refund of visa application fees for working holidaymakers. 

Ms. Clarke says: “We will continue to monitor these matters as they arise and will advocate and fight on behalf of the industry. Things are so tough for venues, we just don’t need any more red-tape and counterproductive policy that will lead to further business closures.” 

Final Thoughts 

The proposed strategies to help the industry recover sounds promising but as Clarke says, the “jury is out” on whether the hospitality industry will benefit from the changes.  

Some changes will not be implemented until new legislation is passed, leaving those who are struggling in the current moment to find other solutions. 

On the bright side, remote work is not going to return to the pre-pandemic state, which is promising for the visitor economy. 

Being able to adapt to changing conditions is an important strategy for businesses that want to survive through these difficult times, and making use of data is one way to ensure those decisions are accurate. 

Deloitte also recommends that, in order to prepare for a possible recession, hospitality businesses should focus on retaining their most valuable customers and developing operational flexibility and responsiveness in order to have the agility to handle market challenges.   

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