More than two-thirds of small and medium-sized businesses are passing on cost increases to customers and around one-third are cutting labour costs.

These are among the findings of Judo Bank’s latest SME Banking Insights, which reported that overall SMEs are resilient in the face of rising inflation and interest rates.

The survey of 1752 SMEs with annual turnover between A$1 million and $50 million found that businesses were adopting a number of strategies to manage higher costs. In addition to passing on cost increases and cutting labour costs, 22 per cent said they were cutting other business costs, 17 per cent are investing in productivity improvements and 44 per cent are restructuring supply chains.

The majority (79 per cent) said they have had to deal with higher input costs over the past six months and 78 per cent are expecting labour costs to increase over the next 12 months.

Judo Bank chief executive Joseph Healy said the bank’s $5.7 billion loan portfolio is in good condition.

“We have reviewed all our customers. The key to a situation like this is to prepare for the worst,” Healy said.

He said Judo has no construction industry exposure, a small exposure to commercial real estate and is cautious about lending to businesses in the discretionary retail sector.

Other findings in the survey were that about two-thirds of SMEs rated engagement with their bank “low quality”, with 20 per cent having no interaction at all. Seventy-four per cent said they want more advice and guidance about their business or industry.

Healy said: “As rates go up and business conditions soften, banks will focus on their existing exposures and pull back on new business growth. That is what they always do.

“That is an opportunity for us. A lender with a high-touch relationship model like ours can identify good businesses that have fallen victim to the risk-off environment.”