Nick Marios said The Olive Grove would be closed on Monday's Queen's Birthday holiday because paying staff public holiday rates was unviable.

The decision comes in the wake of restaurant industry concerns over a proposed new Federal hospitality award to come into effect in January 2010.

And Mr Marios predicted more of the region's restaurants would be forced to close on public holidays, with serious consequences for the tourist industry.

"The takings might be alright but the cost of the wages swallows it up,"Mr Marios said.

"You could lose one or two thousand dollars in one day. The wages would be close to $3000."

Under the current Victorian restaurants award, full and part time staff receive double time wages to work public holidays, while casual staff are paid double time and a half.

He said in the last 12 months industry costs had increased by between 10 and 20 per cent, while the industry had also felt the full effects of the recession.

Restaurateurs said the planned new award would have seen hikes in minimum award wages, penalty rates, casual rates, shift loadings and allowances.

But workplace relations minister Julia Gillard last week told the industry a new award would be drawn up by the Australian Industrial Relations Commission specifically for restaurants and cafes.

The Lake House general manager Shelley Ryan said the decision was a step in the right direction.

She said cafe and restaurant owners had an average profitability margin of about three percent.

"We are pleased Ms Gillard seems to have recognised the difficulties that would have been placed on cafes and restaurants if the award structure they were originally proposing was to go ahead," Ms Ryan said.