All businesses face cost pressures yet rents place a particularly high burden on food and beverage venues as they are typically located in high foot-traffic retail strips, and relocating for better deals is not easy.
Food and beverage businesses were going under at the highest rate of all industries tracked by credit reporting bureau CreditorWatch.
In August, businesses in the industry were failing at a rate of 8.2 percent.
Hospitality businesses are particularly vulnerable to higher interest rates, which dampens consumer spending.
CreditorWatch chief economist Anneke Thompson said conditions had deteriorated quite rapidly for the sector after a good run fuelled by post-pandemic revenge spending.
But mortgage repayments and rents trekking higher has since started to weigh heavily on consumer wallets and spending, making it more difficult to increase menu prices to cover high business costs.
Other interest rate sensitive sectors, such as construction, were also under more pressure than other parts of the economy.
Overall business failure rates had jumped 17.3 percent since January and were now sitting at their highest level since early 2021, which was deep in the Covid-19 pandemic.
Business Council chief executive officer Bran Black says it's not just the economic climate making it harder to run a business, but political decisions as well.
In a speech to the business lobby's annual dinner on Tuesday, Mr Black took aim at the federal government's workplace changes, saying they were a handbrake on hiring.
Prime Minister Anthony Albanese, who spoke at the same event, said job creation had been strong under the reforms.
Mr Albanese expects Thursday's labour force data to show one million new jobs have been created on his watch.
"We are proudly pro-business and pro-worker," he said in a speech.
"We understand secure jobs and fair wages depend on thriving businesses, just as we know productivity gains depend on skilled workers and safe workplaces."
Mr Thompson said Australian businesses were operating under extremely challenging conditions.
Low levels of consumer spending, high inflation and interest rate increases have been putting pressure on businesses.
Yet high failure rates also reflected a level of "catch-up" from pandemic-era lows, Ms Thompson said, with businesses that may have otherwise gone bust supported by JobKeeper payments and a pause on tax office debt collection for firms.
