Australian restaurants face 'tsunami' of cost pressures as closures mount
One in ten Australian cafes and restaurants have already shut their doors, and the sector is now bracing for a rolling wave of compounding cost reforms set to collide over the next six months. That’s on top of payment default rates already running at the highest of any industry in the country.
New data from CreditorWatch shows cafes, restaurants and takeaway food services recorded the highest trade payment default rate of any sector in May 2026, with arrears running at more than double the national average. Payment arrears of more than 60 days are continuing to rise across both cafes and restaurants and pubs and bars, with both now tracking at similar levels of financial stress. Insolvencies across pubs, bars and taverns have more than doubled over the past year.
CreditorWatch chief executive Patrick Coghlan said conditions were unlikely to ease soon.
"I think we're in for a fairly tough time for that industry for the next 12 months, to be honest," Coghlan told the Daily Telegraph. "There's still uncertainty in the economy and inflation remains a concern. Until those pressures ease, it will remain a challenging environment."
Australian Bureau of Statistics figures reinforce the strain, with 49 per cent of accommodation and food services businesses expecting difficulty meeting upcoming financial obligations — among the highest of any sector nationally.
Duncan McGeoch, co-owner of Buddy's Bar in Sydney's Newtown, said the industry was no longer dealing with a single crisis but an unrelenting grind of rising costs and softening consumer spending. He has labelled the issue "death by a thousand cuts".
"Wages and rent are your two biggest costs," he said, adding that customer visit frequency had dropped sharply as household budgets tightened. "People who used to come in two or three times a week might only come in once a week or maybe once a fortnight now. They'll save up and have one bigger night out instead."
McGeoch also flagged rising freight costs driven by higher fuel prices pushing up the cost of transporting kegs from independent craft breweries as a growing burden.
Beyond current pressures, operators are now preparing for a sequence of policy changes that industry groups warn will further compress already razor-thin margins.
From July 1, Payday Super reforms will require more frequent superannuation payments, tightening cash flow for small businesses, while a 4.75 per cent minimum wage increase flows through to award workers across the sector. From October 1, debit and credit card surcharges will be banned under Reserve Bank reforms, stripping venues of a key mechanism for recovering transaction costs. By December, junior wage arrangements will also shift, with hospitality workers aged 18 to 20 set to receive higher rates after the Fair Work Commission ruled discounted wages should only apply to those under 18.
Australian Restaurant and Cafe Association chief executive Wes Lambert said the cumulative effect amounted to an unprecedented hit on a sector where profit margins typically sit between just three and five per cent.
"Most restaurants and cafes have reported that their overall costs each year since Covid have exceeded what they feel they are able to pass on through menu price increases," Lambert said. "Now in 2026 they are facing a tsunami of issues that uniquely affect them, ranging from a drop in tourism, customers resisting higher prices and significant increases in overhead costs."
GoTab Australia general manager Nathan Merriman said operators were being squeezed from every direction.
"Operators are still working harder than ever for every dollar of revenue than they were a few years ago," Merriman said. "The industry is under pressure from multiple directions at once. Margins are tight. Costs are rising, so businesses have to work harder and smarter for every dollar of revenue than they did a few years ago."
Lambert warned many venues would ultimately be forced to lift menu prices by around 10 per cent to remain viable.
Jonathan Jackson, 18th June 2026
