The McKell Institute’s manager of policy, Edward Cavanough, said ongoing cuts to penalty rates and holiday rates will see vital money taken out of local economies.

Mr Cavanough authored the paper Unfair Burden: The Impact of Sunday Penalty Rate Reductions on Regional and Rural Australia, and said the cuts will “lower the discretionary spending of everyone in the community”.

“The money is not going to float around in Bega, but it will be siphoned into the metropolitan centres,” he said.

Mr Cavanough said the July 1 cuts are “ideologically driven”, and not a solution to issues faced by small business in rural Australia.

“There’s always been an aversion to penalty rates, and there has been a long standing campaign to reduce, or get rid of them,” he said.

“The problem is they are there, and the reality is workers have signed up to be paid what they’ve been offered.

“If I was in this situation it would be a real kick in the guts,” he said.

The Fair Work Commission's decision:

Mr Cavanough described the Fair Work Commission’s decision as “rash” and lacking “foresight”, and said further cuts can be expected in the future.

“I think now they are realising it was a bad decision,” he said.

“Bigger companies like Woolworths have worked this into future agreements, so the estimates so far are quite conservative.

“Once this flows on to other businesses the effect will be much greater.

“It is a pretty unfair scenario.”

Mr Cavanough disagreed with the argument the cuts will allow businesses to take on more staff.

“Why would you employ more people when there’s no more work?” he asked.

“They need increased demand.”

He said across Australia businesses are closing down in small communities, where economies are dependent on the spending of low to medium level income earners’ disposable income to survive.

Seven unions are currently appealing the Fair Work Commission’s decision in the Federal Court.

"This is a bad day for working Australians," Australian Council of Trade Unions president Ged Kearney said when the cuts were announced in late February. 

“We are on the way to seeing a whole class of working poor in this country,

"Imagine what that means to someone when they have to pay car registration, they have to pay rent, when they are trying like crazy to get a mortgage."

The union has said the cuts will result in a loss of up to $6000 per year for affected workers.

Small business owner, and former president of the Bega Chamber of Commerce and Industry, Mal Barnes said with the costs of running a business increasing every year, and staffing the most expensive part of his business, the cuts have been a welcome change.

While he said it is too soon to know if the cuts have made a difference, with the cost of running a business in a rural area the same as metropolitan areas, with “a fraction of the customers to draw on”, something must change.

“Everything in general is too expensive, and the cost of the goods, the electricity, the rent, all goes up each year,” he said.

“We work long hours, so to earn less than some employees doesn’t make sense.

“The general public don’t know this, they think you’re scraping money and putting it under your pillow, but we’re not.”

Mr Barnes said his business has collected over $2million dollars in GST since it opened, and he said the government is aware of the amount small business brings to the economy via its collection.

“If we don’t collect the GST then there’s no money for teachers, for police, or any public jobs,” he said.

“The government knows this, they are awake to it.

“There should be more done for small business, because we do generate that income for everyone.

“I used to be an employee and I enjoyed my penalty rates, but it’s getting so tight now there won’t be businesses or jobs for anyone to have in the future if things don’t change.”