The Reserve Bank of Australia’s (RBA) decision to increase interest rates to their highest level in 15 years will intensify the strain on households and small businesses, warned CPA Australia.
The professional accounting body noted that businesses and households are already contending with ongoing inflation, which has led to escalating operating costs and weakened consumer demand.
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CPA Australia Business Investment lead Gavan Ord explained that although the rate rise had been anticipated, it represented a further setback for borrowers and businesses navigating an increasingly difficult economic climate.
Ord said: “Today’s interest rate increase will be deeply frustrating for households and businesses already struggling with cost-of-living pressures and higher borrowing costs.
“For many small businesses, the pressure is coming from every direction: higher interest repayments, persistent inflation, volatile fuel prices, rising operating expenses and subdued consumer demand.
“Many may need to pass on these higher costs to customers. Others may reconsider investment plans, expansion opportunities or hiring decisions to preserve their financial viability.”
According to Ord, the move underscores the fine line Australia’s economy must walk between curbing inflation and sustaining business investment, employment levels and overall economic growth.
He noted that with inflationary pressures showing no signs of easing, both businesses and households need to brace themselves for an extended stretch of elevated borrowing costs.
Ord added: “It is essential that monetary and fiscal policy work in the same direction. The Reserve Bank and the federal and state governments must coordinate their efforts to ease inflationary pressures across the economy.”
CPA Australia has called on governments to focus on prudent spending and substantive reforms aimed at lifting productivity, spurring business investment and rebuilding confidence across the economy.
Ord added: “Businesses should review their cash flow, financing arrangements and investment plans, and seek professional advice early if they are concerned about managing the current economic environment.
“Accountants will continue to play a critical role in helping businesses adapt, manage risk and plan for the future.”
