Regional small businesses are facing growing financial and operational pressures as rising costs, labour shortages and limited access to housing and essential services threaten their long-term viability, according to new research released by the Council of Small Business Organisations Australia (COSBOA).
The 2026 Small Business Perspectives Report, supported by CommBank and independently conducted by Survey Matters, is the fifth annual report produced by COSBOA but the first to focus exclusively on regional, rural and remote Australia.
The research found 87 per cent of regional businesses reported increased operating expenses over the past year, while 73 per cent said profitability had declined. Just 18 per cent expected profits to improve over the next 12 months, and only seven per cent believed business expenses would fall during that period.
The report also highlighted the ongoing challenge of attracting and retaining staff, with 87 per cent of businesses that recruited experiencing difficulty filling vacancies. More than half of respondents rated housing availability in their communities as poor, directly affecting their ability to recruit workers, while 37 per cent identified fuel costs as placing significant financial pressure on their operations.
COSBOA chief executive officer Skye Cappuccio said the findings demonstrated that the challenges confronting regional businesses extended well beyond rising costs.
“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,” Cappuccio said.
She said businesses outside metropolitan areas faced a unique combination of challenges.
“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 difficult trading environment, Cappuccio said many regional businesses continued to identify opportunities through service diversification, domestic tourism and the selective adoption of artificial intelligence and new technologies.
However, she warned that resilience alone would not be enough.
“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,” she said, calling for policies that reduce business costs, simplify regulation and invest in housing, connectivity and essential services.