Here's why it's so tough to run a business in Canberra right now

The Canberra Liberals have hit out at the government for making the ACT “the worst mainland jurisdiction to run a business”, based on new data from the Australian Bureau of Statistics (ABS) on business growth rates.

“There’s a strong growth rate of businesses across the country, which is fantastic, but the reality is more and more ACT businesses are not surviving,” leader Leanne Castley said in a statement.

“We are also hearing from local businesses that the cost of insurance and energy is dragging them down and making it harder to pay the bills.”

But in response, the government has lauded the ACT as having one of the nation’s strongest economies, citing a growing GDP, a strong labour market with “record levels of employment, solid growth in real wages, and the fastest business growth in Australia”.

“Private enterprises represent a critical part of the ACT’s diverse economy and are a driver of our economic performance, our community’s wellbeing and a significant employer,” an ACT Government spokesperson told Region.

So what’s going on?

Both the opposition and government have pulled data from the same ABS report, ‘Counts of Australian Businesses, including Entries and Exits’, published 26 August – just different data.

Over the 2024-25 financial year, the number of registered businesses in Australia increased by 2.5 per cent to a total of 2,729,648. But while 437,150 new businesses entered the market (16.4 per cent), another 307,500 (13.9 per cent) exited.

In the ACT, these figures indicated a 1.9 per cent growth in the number of businesses (for a total of 36,996), with an entry rate of 17.4 per cent and an exit rate of 15.1 per cent.

According to the Canberra Liberals, this is indeed the lowest growth rate for any Australian jurisdiction, except for Tasmania’s 0.5 per cent (Western Australia performed the best, with 4.3 per cent growth).

Go back every year since 2021-22, however, as the ACT Government has done, and the growth rates were 7.3 per cent, followed by 3.8 per cent in 2022-23 and 3.5 per cent in 2023-24.

These figures made the ACT the second-best-performing jurisdiction in 2021-22 (behind Victoria), the first in 2022-23, before we tied with WA in 2023-24.

The annual compound growth rate appears to be 4.1 per cent, which is also above the Australian average of 3.2 per cent.

Okay. But what’s it like on the ground?

This is where the Canberra Liberals are closer to the real picture – because it’s not good.

The Canberra Business Chamber (CBC) is a not-for-profit organisation that advocates on behalf of the local business sector. CEO Greg Harford says while it’s true there’s “a lot of innovation and a lot of businesses starting up in the ACT”, there are also “a lot of barriers to those businesses being successful”.

“So we’ve got businesses that start, but they don’t last.”

Or, there’s Raine & Horne Commercial Canberra, which leases out commercial properties to various businesses all over the ACT.

Managing director Mark Nicholls has seen six businesses so far this year forced to break leases – two in Gungahlin, one in Belconnen and the rest on the Kingston Foreshore. A growing number are joining lease payment plans.

“I’ve worked in the commercial property industry in the ACT for nearly 20 years, and it’s becoming increasingly common to see local businesses under financial pressure – both tenants and owner-occupiers,” Mr Nicholls says.

“This year alone, Raine & Horne Commercial Canberra has received multiple requests to assist tenants … because they are struggling to pay rent.”

There’s more.

A large proportion of the new jobs created in the ACT are related to the public sector, not private business. Jobs in the ACT increased by approximately 8000 over 2024-25. If the private sector share matches the national trend of 20 per cent, private businesses in the ACT would account for only 1600 of those new jobs.

“The economy is continuing to grow in the ACT, but a lot of that is predicated on government spending,” Mr Harford says.

“We’ve seen more and more jobs created over the last few years, but many of those are in the public sector rather than in the private sector, and the sense I get is that the private sector is really putting the brakes on investment.”

What’s the cause?

The current economy is the obvious one. We’re talking a cost-of-living squeeze driven by volatile inflation and housing pressures, lacklustre productivity and wage growth, long-term structural issues related to migration and debt, and underwhelming growth.

“The economy is still very difficult overall,” Mr Harford says.

“The businesses I’m talking to are saying it’s the toughest economic time since COVID.”

But Mr Harford doesn’t let the ACT Government off the hook either.

“We’ve a system in the ACT which is very high cost – we’ve got very high rates, charges, taxes and levies imposed by the ACT Government.”

Payroll tax is a big one, where businesses that earn more than $2 million a year pay the government a 6.85 per cent slice of total wages (the rate increases when companies earn more than $50 million).

Then there is the commercial lease duty, which applies to all properties leased for retail, business, or industrial use (such as supermarkets, department stores and accommodation).

Businesses in Civic or some parts of Braddon also pay the ‘city centre marketing and improvements levy’, with rates varying between 0.21 and 0.29 per cent depending on whether the area is “retail core” or not.

This is in addition to stamp duty for property buyers and commercial land rates.

Mr Nicholls places the latter as the biggest contributor to business struggles.

“The ACT Government has substantially increased commercial property rates year-on-year at levels far above CPI, which ultimately affects both business owners who own their own property, and tenants who rent their premises,” he says.

Since the COVID-19 pandemic, more government employees have also gravitated towards working from home, which has particularly impacted hospitality, recreation, and retail businesses in Civic and town centres like Belconnen and Woden, as they “rely heavily on both public sector and private sector employees … spending money during lunch breaks and after work”.

“With fewer people in these areas, many businesses are struggling to trade as they once did,” Mr Nicholls says.

“Canberra small business owners also face the unique challenge of competing with public sector salaries. As a small business owner myself, I know first-hand how difficult it is for ACT businesses to offer staff competitive remuneration and superannuation packages compared to the public service.”

But things will improve, right?

Not if the latest ACT Budget is anything to go by.

The government does provide “a range of target businesses assist programs”, including the Access Canberra Business Assist Team and the Canberra Business Advice and Support Service (CBASS).

But while Mr Harford says states are “going the other way” by alleviating costs for businesses, it’s not happening here.

From 1 July 2026, the payroll tax threshold lowers from $2 million to $1.75 million, hitting more businesses (even if the rate drops slightly from 6.85 to 6.75 per cent).

Commercial property rates have also risen by 3.75 per cent, and are slapped with a new annual ‘health levy’ of $250. Land tax across all properties has increased 5 per cent.

We’re not done.

The 2025-26 Budget also expands the ACT’s portable long-service leave scheme to cover more sectors, including hairdressing, beauty, accommodation, and food services.

From 1 July 2026, these businesses will be required to allow workers to accrue leave based on total service within the industry, rather than with a single employer. They will also be required to register with the ACT Long Service Leave Authority, pay levies, and comply with reporting obligations as part of this requirement.

“From the CBC’s point of view, we want Canberra to be the greatest place in Australia for business,” Mr Harford concludes.

“But to do that, we need to talk about how we can grow the economy, and a high-tax, high-cost environment is not one that’s conducive to economic growth at the end of the day.”

Mr Nicholls says a reduction in commercial property rates would be a quick fix “for both tenants and owner-occupiers”.

“Past that, we need to focus on increasing foot traffic to these struggling town centre areas – namely, by getting more public servants back in the office.”