The first week of May has handed Australian business owners a lot to digest. The Reserve Bank lifted the cash rate for the third time this year, the Treasurer is preparing a federal budget that will be judged squarely on small and medium-sized business, and the dollar has quietly run from 63 US cents in November to above 72 US cents, a 15 per cent climb in six months. For anyone running a balance sheet, refinancing soon, or sizing up equipment before 30 June, these moves matter. We thought it was worth pulling the threads together so you can see the full picture rather than the headlines.
The cash rate is back at 4.35 per cent
On Tuesday afternoon (5 May), the RBA Monetary Policy Board lifted the official cash rate by another 25 basis points, taking it from 4.10 per cent to 4.35 per cent. That is the third consecutive hike since the tightening cycle restarted in February, and it puts the cash rate back at a level we have not seen since the November 2023 to February 2025 window. The vote was eight to one in favour of the rise, which is about as close to unanimous as the Board gets these days.
The driver, in plain terms, is the oil shock. The conflict in the Middle East has pushed a meaningful slice of global energy supplies offline at various points, fuel prices are climbing, and that is feeding through into consumer prices faster than expected. The March monthly CPI indicator came in at 4.6 per cent, a jump from 3.7 per cent in February and the steepest single-month rise since the series began in 2017 (ABS). Trimmed mean inflation, the measure the Bank actually targets, is sitting at 3.3 per cent, comfortably above the 2-3 per cent band.
The Board is now pencilling in trimmed mean inflation peaking at 3.8 per cent in June and finishing 2026 at 3.5 per cent in its central case. Unemployment is expected to drift only slightly above 5 per cent even in the more adverse scenarios, because the labour market remains extremely tight. Governor Bullock framed this hike as buying breathing room, a chance to sit back and watch how the economy responds before the Bank’s next move. The next decision is locked in for 16 June 2026.
What the banks are doing, and what has already moved
For owner-occupiers, the average variable rate is heading back to about 6.26 per cent, a level not seen since January 2025 (Canstar). On a $600,000 mortgage with 25 years remaining that is roughly an extra $91 a month. On a $1 million loan the rise is closer to $453 a month, and across all three hikes the average increase comes in at $272 a month. Commercial borrowers should expect the majors to follow through quickly on reference rates and overdraft pricing.
The forecast for what comes next splits the majors. CBA, ANZ and NAB all see this as a one-and-done for May, followed by an extended pause. Westpac is the outlier and is calling two more hikes, one in June and one in August. The market is roughly split between those views, which is why fixed-rate appetite is rising. Six per cent of broker-submitted home loans in April included a fixed portion, double the three per cent we saw a year ago.
Worth flagging: by the time the RBA actually moves, the fixed market has usually moved already. Fixed pricing is set off swap rates and the Bank Bill Swap Rate (BBSW), and those benchmarks respond to global bond markets, US inflation prints, oil supply news and geopolitical risk, often within hours. Every major bank has lifted at least one fixed rate in the past month. If you are weighing up fixed versus variable, the question is no longer whether the RBA will hike again. It is what funding cost your lender will be facing when your facility resets. Rate locks, paid as a one-off fee usually rolled into the loan and valid up to about 90 days, are sensible insurance for anyone caught in the application-to-settlement window while swap rates move sharply. They are not a forecasting tool, but they remove one nasty surprise.
The non-bank market is widening
We are seeing more clients who do not fit neatly into a Big Four credit policy but are a long way from being in trouble. These are profitable, asset-backed operations whose original debt was structured under low rates, abundant liquidity and a different bank risk appetite. The capital structure has not aged with the environment, and when covenants tighten or earnings dip after an acquisition, the relationship goes from supportive to uncomfortable in a hurry.
What works for these businesses is reset capital rather than rescue capital. That can mean extending maturities, reshaping repayments to track actual cash flow, consolidating multiple facilities into one structure, or temporarily structuring interest payments to ease short-term pressure. Done well, the borrower stops managing the lender and goes back to managing the business, and within 18 to 36 months they typically refinance back into a bank facility on cheaper terms. Private credit lenders operating across strategic capital, asset-backed finance and real estate credit have raised meaningful new fund commitments this year and have capital ready to deploy. If you have been quietly told you are no longer a core relationship by your incumbent bank, this is a market we know well and we would be happy to walk you through what the structure can look like.
Government stimulus and the budget runway
The Federal Government’s $1 billion Economic Resilience Program is now flowing, with the major banks supporting the rollout. It is zero-interest lending of up to $5 million per applicant, available to businesses with turnover under $100 million in sectors most exposed to the recent fuel and supply chain shocks (nrf.gov.au). If you are in transport, manufacturing, agriculture, food production or any sector where energy or imported inputs are a meaningful share of your cost base, check eligibility early. Allocations on these schemes tend to move faster than the press release implies.
Looking ahead, the federal budget is expected to lean further into SME cash flow. Industry is pushing hard for several measures: lifting the $20,000 Instant Asset Write-Off from a temporary measure to a permanent setting (the current expiry date is 30 June 2026), faster payment times across the public sector and large corporate supply chains, and practical transition support for the move to Payday Super. That last one is more material than most owners realise. Paying super on payday rather than quarterly is a genuine cash flow event, with surveys suggesting 58 per cent of employers are still unaware of the change and around 40 per cent may need a line of credit to bridge the timing shift (Employment Hero). On the tax side, if you have been delaying a piece of equipment, finalising it before 30 June continues to be the safest assumption while the write-off remains in its current form.
The currency is doing some of the work
A point that often gets lost in the rate-hike noise: the Australian dollar has run from about 63 US cents in November to above 72 US cents this week, a 15 per cent move. The drivers are a mix of the RBA being an outlier on rates (capital flows in), a softer US dollar, and resilient commodity prices. The Aussie is also stronger against the euro, sterling, the yen and even the tightly managed yuan.
That matters because Australia now imports roughly 30 per cent of its consumer goods, up from about 12 per cent in the 1970s. As a rough rule of thumb, a 10 per cent appreciation in the AUD takes around 2 percentage points off inflation over 12 to 18 months (Outlook Economics). In other words, the currency is quietly doing some of the disinflation work for the RBA, particularly on imported goods and services. For importers and businesses with offshore inputs, this is a window to renegotiate supplier terms, consider hedging cover for the back half of 2026, and re-cast capex pricing assumptions in your favour.
So what does it all mean for your business
The honest read is that the next six months will reward owners and CFOs who plan rather than react. With the cash rate at 4.35 per cent, fixed pricing already up, a stronger dollar pulling on imported costs, and a budget that will likely tilt further towards SME cash flow, the practical questions are these. Is your debt structure aligned to where rates actually are, not where you assumed they would be when you set it up. Have you stress-tested working capital for the Payday Super timing change. Have you priced in a stronger AUD if your input costs are import-heavy. And does your finance mix still suit the business you are now, rather than the one you were two refinances ago.
If any of that prompts a question about your facility, refinancing into a non-bank, asset finance before 30 June, or accessing the Economic Resilience Program, we are happy to talk it through with you. There is no obligation. Sometimes a twenty-minute conversation confirms you are well positioned, and sometimes it surfaces an option you did not know existed.
Disclaimer: This article is general information only and does not take into account your personal financial, tax or credit circumstances. It is not personal financial, tax or credit advice. You should seek your own professional advice before acting on anything contained in this article.
