Hospitality Business Closures

Adjourned debate on motion of Hon. J.S. Lee:

That this council—

1. Recognises the important economic and social contributions of South Australia's small and family businesses within the hospitality industry;

2. Notes the increasing and alarming number of hospitality venue closures in the past 12 months, with approximately 20 reported to have closed their doors between 1 January and 30 April 2024 this year, with the list including some well known and long-established local restaurants;

3. Notes that the hospitality business closures have hit every corner of the dining scene, within metropolitan areas of Adelaide as well as in regional South Australia;

4. Notes that the hospitality sector is buckling under the heavy strain of inflation, low profit margins, rising interest rates and staggering skills shortages;

5. Notes that hospitality business closures are associated with the skyrocketing costs of doing business in South Australia, in particular soaring power prices, payroll tax, red tape and the growing costs of goods and services, along with reduced consumer spending due to rising costs of living; and

6. Calls on the Malinauskas Labor government to provide better support to address key concerns in the hospitality sector to prevent further job losses and more business closures in South Australia.

(Continued from 16 October 2024.)

The Hon. D.G.E. HOOD (17:54): I rise to speak in support of this motion, which recognises the important economic and social contributions of South Australia's small and family businesses in the hospitality industry, drawing attention to the alarming number of venue closures in this sector this year due to inflation, supply chain issues, skill shortages, low profit margins, increasing rental costs and skyrocketing energy prices, of course, all in conjunction with lower consumer demands for goods and services due to cost-of-living pressures.

Our hospitality industry plays a pivotal role in South Australia's economy, culture and community. Our restaurants, cafes, bars, pubs and accommodation services are vital economic drivers, employing approximately 60,000 South Australians according to Skills SA, many of whom are young people, of course, and many of those are still studying or in training; indeed, my daughter is one of them. The industry also assists in attracting well over seven million visitors annually to our state from across the nation and across the world.

As the mover of this motion, the Hon. Ms Lee, has previously mentioned, accommodation and food services accounted for no less than 16.9 per cent of our gross state product in the year 2022-23. Beyond this considerable financial contribution, the hospitality sector fosters a unique culture and identity that is proudly showcased to the entire world. Tourists are certainly often drawn to South Australia not only for its natural beauty and cultural landmarks but for its reputation as a destination of quality cuisine and beverages, with our wine industry of course being one of the most outstanding in the entire world.

The innovation and passion of our local chefs, our winemakers, our breweries and service professionals all helps to foster and establish our state's own distinctive brand. It is therefore disheartening to hear of so many hospitality venues closing their doors in recent times due to financial hardship. The Hon. Jing Lee provided a long but by no means exhaustive list of many beloved cafes and restaurants that have closed in just this last year alone, all of which will be missed by many of us present and, of course, by our constituents.

Some of these venues include Beach Organics, Enzo's Ristorante—a very famous one most of us would know—Folklore Cafe, Gang Gang, Lost in a Forest, Paddy Barry's, Zenhouse, Chicken & Pig, the Ed Castle, Hog's Breath Cafe, Cardone's, Super Bueno, Martini on the Parade and Brid Coffee Shop. I could go on and on. It is important for us to take note of what South Australian business owners are saying about their current struggles, which some consider to be worse conditions than they experienced even during the COVID pandemic, including the director of EMBR Hospitality, Sam Worrall-Thompson. In reference to payroll tax in particular, Mr Worrall-Thompson told the media:

[Payroll tax] is [costing] 100 grand a year that we didn't know about two years ago…So you get punished for growth, essentially. I think the closures that we're talking about now, I reckon it's just the start. I reckon it's going to be an absolute bloodbath for six months. And it'll be good businesses [that close] as well, it won't be people that run a bad operation. It will literally be some of the best that I think we need to try and keep them open somehow.

As the Hon. Jing Lee noted in her contribution, lifting the payroll tax threshold is a sensible measure and one that would undoubtedly provide immediate relief to many struggling local businesses. Members may recall that when the previous Liberal government was elected in 2018, it swiftly implemented its policy to remove payroll tax for small business. Within its first year in office, the former state government delivered on the promise, benefiting more than 3,200 small businesses in South Australia and providing confidence to over 135,000 microbusinesses and sole traders, who would expand their operations knowing that they would not be dealt another tax simply for providing more South Australians with employment.

The previous Liberal government at the time recognised the need to address the barriers to the creation of job opportunities that we experienced for years under the previous Labor government. Payroll tax had been imposed upon businesses with payrolls of just $600,000 or more, effectively meaning that small to medium-sized businesses, which should be given the most incentive to prosper, experienced the most difficulty, the most challenges and the most strain.

Going forward, it is crucial that the government of the day continues to support businesses in the hospitality industry with a pragmatic approach. The hospitality sector has endured significant setbacks in recent years, ranging from catastrophic global events to changing consumer trends and, importantly, rising higher cost bases, including power costs. Many businesses are still recovering, and they require the current state government's intervention and assistance to thrive once again. By supporting our hospitality sector, we are effectively investing in South Australia's economic resilience, its social fabric and its global reputation. I support the motion.

Sitting suspended from 17:59 to 19:47.

The Hon. N.J. CENTOFANTI (Leader of the Opposition) (19:47): I rise to support this motion put forward by my honourable colleague, and I would like to take a few moments to reflect in particular upon the impact of the current cost-of-living crisis and the cost-of-doing-business crisis upon regional South Australia's hospitality industry.

The hospitality industry in regional and rural South Australia has long been a central part of the community, serving as both social hubs and important economy contributors. Country pubs, restaurants and cafes offer essential services to local residents and tourists alike, helping sustain small towns through job creation and community engagement. However, in recent years rising business costs have significantly impacted the survival of these establishments, leading to closures and impacting these local economies.

One of the primary financial pressures facing these businesses is the increased cost of supplies. Regional areas often face high costs for food, beverages and other essentials, due to transportation expenses and limited supplier options. This expense is exacerbated by inflation and supply chain issues, particularly following recent economic disruptions. Higher wholesale costs ultimately reduce profit margins, making it difficult for pubs and restaurants to keep prices affordable for their customer base, which is often price sensitive in regional areas.

Labour costs can also be challenging. Wages are essential for attracting quality staff, which can be costly for small regional businesses with limited revenue. Furthermore, regional South Australia, as is a familiar scenario in metropolitan Adelaide, faces a shortage of skilled labour, making it challenging for hospitality businesses to find and retain staff while offering competitive wages, benefits or training programs.

Utilities and operational expenses, such as electricity, have also spiked in recent years under the Malinauskas Labor government. Our power prices are the highest in Australia. That is no secret nor is it a question of debate; it is simply a highly vexing fact. Without doubt, it is one of the biggest financial hindrances across all sectors of business today.

Many rural pubs and restaurants are housed in older buildings, making energy efficiency upgrades costly but necessary to meet environmental standards and reduce ongoing utility expenses. Combined, these rising costs have forced many hospitality businesses to make difficult decisions, with some opting to close their doors. The closure of country pubs and restaurants is a significant loss for our regional communities, as it not only impacts local economies but also affects the cultural and social fabric that these venues help maintain in regional South Australia.

The opposition is focused on identifying opportunities to remove unnecessary costs and red tape to see the costs of doing business reduced. One such measure is our commitment to reviewing the payroll tax threshold. Under the Marshall Liberal government, we lifted the payroll tax threshold from a measly $600,000 to $1.5 million, a significant incentive to encourage smaller businesses to employ more South Australians. Our plan, if we are elected in 2026, will be to lift the payroll tax threshold once again, from $1.5 million to $2.1 million, because we care about South Australian businesses and we care about jobs growth.

We are also committed to exempting trainee and apprenticeship positions from payroll tax. There is a skills shortage right across the state. We want to remove as many barriers as possible to addressing that problem. The opposition will make it easier and cheaper for employers who take on an apprentice or a trainee to grow their business and provide vital training during a skills shortage, both in the regions and in the city. Whether it is a certificate in hospitality, butchery, baking, tourism events or food processing, we want to make it easier to get skilled people into training, into jobs and into our regions. We are serious about business and productivity, and we want to see our small and family businesses thrive.

This is just a part of our previously announced commitments to reduce the cost of doing business, because a responsible government focuses on improving productivity and effective investment within South Australia, rather than blowing out costs and jacking up taxes. I sincerely hope this state Labor government will pull its head out of the sand when it comes to the financial barriers to doing business in regional South Australia, and indeed around all of South Australia. With that, I conclude my remarks and commend this motion to the chamber.