CPA Australia has warned that the latest interest rate increase by the Reserve Bank of Australia (RBA) will add to the financial strain on small companies and families already grappling with higher living costs.

The statement was issued after the RBA decided to increase the cash rate target by 25 basis points to 3.85%.

The accounting body said the rise will increase existing cost pressures and stretch “already tight budgets” for households and small businesses.

CPA Australia Business and Investment lead Gavan Ord said the RBA decision was largely expected due to persistent inflation in parts of the economy.

Ord added: “Borrowers who had been encouraged by recent rate cuts will be deeply disappointed, particularly households coming off long-term fixed rates who are now facing much higher repayments.

“Small businesses remain under pressure from high borrowing costs, rising inflation and low consumer confidence. For many, there are no easy options left.”

CPA Australia stated that assistance for small businesses should emphasise long-term reform rather than short-term measures.

Ord stated: “What small businesses need most is decisive government action to reduce red tape and improve the overall business environment. Removing unnecessary regulatory burden helps businesses focus on growing, employing people and serving customers.”

The organisation cautioned that as business costs continue to rise, consumers could face higher prices at the checkout.

Ord also encouraged those feeling financial pressure to obtain expert support and called on governments to improve access to professional advice for small enterprises.

“Accountants can help businesses plan, manage risk and navigate changing economic conditions,” he said.