By Jacob Shteyman in Canberra

After years of high inflation taking a toll on customers and business costs, P&V Liquor co-founder Mike Bennie has never seen it so difficult.

“I’ve never seen the kind of mortality rate of business that’s going on right now, and also the sense of foreboding that a lot of people have in terms of job security, in terms of viability of business, and in terms of how business looks like in the future,” he said.

“We’re going to see an incredible attrition rate coming in the new year.”

He says it’s a view shared amongst his competitors, who are all questioning how they will stay afloat with no signs of the regular festive season boost.

From his trendy bottle shop-cum-wine bar outposts in Newtown and Paddington in inner Sydney, Mr Bennie has noticed a drop in foot traffic and people cutting back on purchases.

When customers do go out, they are often downtrading to cheaper products or smaller quantities.

As well as impinging on consumers’ spending capacity, high inflation and interest rates have also increased the cost of doing business.

“It’s not like we are reducing overheads in terms of staffing, our rent keeps increasing each year, transportation of goods and cost of goods are going up. So in all that, we’re really feeling the pinch,” he told AAP.

The challenge is not confined to the hospitality sector.

Small business owners across Australia are increasingly contemplating selling up, with conditions taking a toll on their mental health.

More than a third of small business operators have been diagnosed with a mental health condition, including anxiety, depression or stress, a survey by the Australian Chamber of Commerce and Industry (ACCI) has found.

Of 250 small business owners surveyed by ACCI, 34 per cent had received a mental health diagnosis from a doctor in the previous 12 months, compared with 21.5 per cent of Australians aged 16 to 85 in Australian Bureau of Statistics data.

Anxiety was the most common issue, at 23 per cent, while 17 per cent suffered depression, 15 per cent had a stress related problem, and four per cent had other mental health conditions.

Business owners told the survey they were overwhelmed by growing regulation and found it hard to keep up with constant changes.

“I feel the current government has no idea of all the red tape a business needs to deal with, not to mention the cost,” one respondent said.

The survey should act as a wake-up call for policy makers to address over-regulation in the business sector, said ACCI chief executive Andrew McKellar.

“Small business owners are human beings and when they get overwhelmed, they break,” Mr McKellar said.

In the hospitality sector, intractable licensing laws and labyrinthine DA approval processes often constrain businesses’ ability to respond to changing economic conditions.

Mr Bennie called for a more European approach to regulation

“The cosmopolitan nature of most of Europe is such where a restaurant can retail and bars can be shops, where there’s a flexibility around alcohol retailing, particularly, and that’s hampered somewhat our ability to be a bit more nimble,” he said.

Another ACCI survey released in July found 45 per cent of small business owners considered closing down or leaving the industry in the previous 12 months, while 82 per cent said red tape was having a moderate to major impact.