Federal Budget Fallout Hits Small Businesses as Confidence Drops

Restaurateur Chris Lucas says confidence and economic activity plunged after the federal government released its 2026-27 budget in May. Businesses across property, hospitality and retail suffered the decline. The owner of Lucas Collective called the conditions an economic “collapse,” a blunt account of how policy decisions made at the top affect people trying to keep businesses running.

A budget and a sudden drop

“I've never seen so many elements of the economy literally either collapse or come to a standstill as I have in the last few months. Especially since the federal budget,” Lucas told 2GB Drive. He said the change in confidence showed up during the first week after the budget’s release. “First of all we never saw such a decline in confidence as that. And then after that, we saw a complete drop in the economy,” he said.

Lucas pointed to the breadth of the downturn. “It doesn't matter whether it's in the property sector, in hospitality, in retail as you've just heard about David Jones. Everyone has suffered a substantive decline almost literally after that federal budget. It can't be a coincidence.” Lucas runs Chin Chin, Society, Maison Bâtard and Grill Americano. His comments describe the pressure on businesses in concrete terms, rather than leaving the consequences inside budget documents and official forecasts.

Listeners also described small businesses closing and confidence worsening. One said the number of small businesses shutting was “over the top.” Another said, “Literally everything has been worse since Jim's budget,” adding, “He has killed the economy and the confidence for everyone.” A third listener argued that politicians lacked experience running businesses, saying “no one but one cabinet minister has ever run a business” and that politicians had “no idea about the plight of running a business let alone a country.” These are listeners’ assessments, not an official measure of the budget’s effects.

Who gets to set the terms

Lucas said politicians and bureaucrats didn’t understand the difficulties small businesses face. “I really genuinely don't think (the politicians) get it,” he said. He said today’s politicians and bureaucrats differed from those of the past, and wouldn’t employ them in a fish and chip shop. “That's for sure,” he said when asked whether he would hire them in his restaurants’ dishwasher section.

The report also described a dispute over what the Productivity Commission can examine. Treasurer Jim Chalmers faced criticism after it emerged he had ordered a federal productivity report to leave out the effects of tax or workplace relations settings. Bran Black, chief executive of the Business Council of Australia, called those settings the “two biggest barriers” to investment. He compared their exclusion to a Monty Python skit, saying the government had sent the commission to address the productivity crisis while “chopped off its arms” by barring it from examining tax and industrial relations policies.

Rates, savings and official explanations

Earlier in the week, the Reserve Bank of Australia raised interest rates for the fifth time that year, taking them to 4.85 per cent, the highest level in 18 years. Chalmers and Prime Minister Anthony Albanese also faced accusations that they gave Australians false hope by touting billions of dollars in budget savings. Economist Chris Richardson said the government had redirected claimed savings to other expenses. “The official figures say the exact opposite of what the government claims – its decisions have made the budget worse, not better,” Richardson posted on X late last month.

Chalmers continued to blame the Middle Eastern war for volatile economic conditions in an opinion piece published in Capital Brief on Friday, titled “The war is driving inflation, but our budget must play its part.” He wrote on X that recent events showed how volatility was “heaping pressure on people,” while also saying budgets weren’t the primary driver of prices but could play a helpful role. “Nobody is saying the job is done,” he added. “Improving the budget is a job that never ends.” The report includes no community-led response; the people quoted describe the strain, while government officials and business figures argue over the policy machinery above them.