Owner Steve Rumble said over the past eight months he had noticed people were spending less.

He said customers would cut back, picking up just a sandwich rather than a meal deal or buying something sweet only once a fortnight.

Cost of living, less people in the door and less wholesale orders have all contributed to the decision to close.

But Mr Rumble said the final straw was lack of parking on Lydiard Street - particularly as cars would pay to park in front of his shop all day.

After businesses raised concerns, Ballarat council said they would bring in more five-minute parking bays, on a trial basis.

But Mr Rumble said the changes are coming too late for his business.

Mr Rumble said there are less people walking past the bakery, despite its prime location.

"Visitors to the CBD [have dropped]; January was the worst January since I've been here," he said.

"I relied a lot on people in the CBD, so when people started working from home that affected the business because people weren't in town as often."

As residents have less money to spend, Mr Rumble suspected they were more likely to save up and go to a cafe once a week or fortnight rather than the bakery being part of their habits.

He said he wanted to thank many of his regular customers.