Regional small businesses under pressure as costs, workforce shortages and service gaps deepen

Australia's regional, rural and remote small businesses are facing mounting pressure from rising operating costs, declining profitability and workforce shortages, with new research showing the challenges of running a business outside capital cities are being intensified by distance, service gaps and infrastructure constraints.

Released today by the Council of Small Business Organisations Australia (COSBOA), with the support of CommBank, the 2026 Small Business Perspectives Report is COSBOA's fifth annual research report and the first focused exclusively on regional, rural and remote Australia. Conducted independently by Survey Matters, the research provides a detailed national snapshot of the challenges, opportunities and outlook facing regional small businesses.

The research paints a picture of businesses operating under sustained pressure, where rising costs are compounded by housing shortages, limited access to essential services, workforce challenges and infrastructure gaps that are increasingly shaping the future of regional communities, not just individual businesses.

While the report highlights the resilience and adaptability of regional small business owners, COSBOA said the findings also show that many businesses are being asked to carry pressures that no individual operator can solve alone.

Key findings include:

87% of regional small businesses report business expenses have increased over the past year.
73% say profit has fallen, while only 18% are optimistic profit will improve over the next 12 months.
Just 7% believe business expenses will decrease in the year ahead.
87% of businesses that recruited experienced difficulty filling roles, with shortages continuing across skilled trades and specialist occupations.
37% say fuel costs are placing significant or critical financial pressure on their business.
52% rate housing access in their community as poor, directly affecting their ability to attract and retain workers.
25% identify regulation and compliance as one of the biggest pressures affecting their business.
77% of business owners experienced business-related stress or anxiety during the past 12 months.

COSBOA CEO Skye Cappuccio said the report highlights that the challenges facing regional small businesses extend well beyond their balance sheets.

"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.

"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.

"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 Executive General Manager, Small Business, Rebecca Warren, said regional small businesses continue to play a vital role in Australia's economy and communities.

“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.

“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. 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.

“That’s why we continue to proactively engage with our customers to understand the support they need, whether that is managing cash flow, or investing where there are opportunities to grow.

“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.”

Ms Cappuccio said the report provides governments with a practical roadmap for strengthening regional Australia.

"If we want stronger regional economies, we need policies that make it easier – not harder – for small businesses to invest, employ people and grow. 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 from the 2026 Small Business Perspectives Report will help inform discussions at the 2026 COSBOA National Small Business Summit, where regional Australia will be a major focus. Bringing together policymakers, industry leaders and small business representatives, the Summit will examine the research and the policy settings needed to strengthen regional businesses and the communities they support.