The Reserve Bank has left the cash rate at 4.35%, and on the surface that looks like more of the same. Look a little closer at the language, though, and the picture is more interesting. The commentary that came with this hold was noticeably hawkish, and for business owners and CFOs weighing up debt, that shift in tone matters more than the unchanged headline number.
We wanted to unpack what has actually changed, because the difference between “steady as she goes” and “steady, but watch out” has real consequences for how you structure and time your borrowing over the next six to twelve months.
A hold, not a pause
The Board acknowledged a few things that, on their own, would usually point towards easier policy. Housing market conditions have softened by more than expected. The labour market has loosened a little further, with unemployment now at 4.4%, above the 4.2% the Bank had pencilled in back in May. Policy itself was described as “somewhat restrictive”, which is central bank shorthand for rates doing their job of slowing the economy.
And yet the Board is still clearly worried that inflation is too high, and it sees the risks sitting to the upside rather than the downside. That is the crux of it. A softer economy has not been enough to relax the Bank’s guard on prices.
The wording around what would trigger a rate rise has also firmed up. Earlier in the year the language was that rates could move “if required”. The more recent framing points to a move “if upside risks materialise”. It is subtle, but it tells you the bar for staying on hold is now lower, and the bar for a hike is closer than many borrowers assume.
Why the next move may be up, not down
This is where we would gently challenge the assumption that still sits in a lot of boardrooms, which is that the only question is when rates will fall. On current trends, the more likely next move is another increase.
The reasoning comes down to inflation stickiness. Headline inflation came in softer for the June quarter at 3.8%, with the trimmed mean at 3.5% (ABS, June quarter 2026). That is progress, but it is still above the 2 to 3% band the Bank is targeting. Early estimates for the September quarter suggest underlying inflation could run at 0.9 to 1.0% for the quarter, which would be hotter than the roughly 0.8% pace the Bank’s own forecasts imply. Business surveys have been pointing to new financial year price increases coming through more strongly than is normal for this time of year.
Then there is fuel. It is one of the biggest single contributors to the cost of almost everything, and it is volatile. Ongoing instability around the Strait of Hormuz and the reinstatement of the fuel excise both push in the same direction, which is upward pressure on prices the Bank cannot easily ignore.
Put it together and our working view is that a 25 basis point increase around November is a live prospect, most likely once the September quarter inflation figures are in hand. There is even a chance of an earlier move if the monthly inflation prints and June quarter growth data confirm that those upside risks are showing up in the numbers. The market has been steadily lifting the probability of an increase within the next six months, and at least one of the major bank economics teams is calling a rise at the November or December meeting, followed by the start of a cutting cycle only from the middle to the end of 2027.
We would stress this is a view, not a certainty. Forecasts get revised, and the Bank itself has downgraded its expectations for household spending on the theory that falling house prices will make people more cautious. Interestingly, the hard data has not fully backed that up yet, with household spending actually up 0.7% in real terms in the June quarter (ABS, June quarter 2026). The point for planning purposes is simply this: build your borrowing decisions around a scenario where rates hold or rise from here, not one where relief is just around the corner.
What this means for how you fund your business
If the next move is more likely up than down, a few practical questions follow.
The first is around fixed versus variable. We are not in the business of telling anyone that fixed is always right, because it depends entirely on your cash flow, your risk appetite and how long you need certainty for. But when the balance of risk on rates is tilted upward, the value of locking in some certainty rises. For a business with tight covenants or thin margins, knowing exactly what a chunk of your repayments will be for the next two or three years can be worth more than chasing the lowest possible variable rate. It is worth at least modelling.
The second is timing. If you have expansion plans, an equipment purchase or a property acquisition that you have been nudging down the calendar, it is worth asking whether waiting actually saves you anything. If borrowing costs are more likely to rise than fall over the next year, the “wait and see” approach can quietly become more expensive, not less. That does not mean rushing, but it does mean making the timing decision deliberately rather than by default.
The third is working capital and buffers. A restrictive rate setting that may get tighter is exactly the environment where a bit of headroom pays for itself. Having an approved facility sitting ready, even if you do not draw on it, gives you options if trading conditions or input costs move against you. Asset finance can play a similar role, keeping cash in the business rather than tied up in equipment you could fund another way.
The lending market is quietly reshaping around you
There is a second story running underneath the rate debate, and it is one that works in favour of business borrowers who know where to look.
Lending volumes have fallen away. First home buyer activity is down around 6.7%, and investor loan applications have dropped by roughly 30%. That is a big hole in the pipeline for the major banks, whose whole distribution model relies on volume flowing through the system. The largest lenders all need that flow to make the economics of their networks work.
Their response has been telling. Rather than compete hard on headline mortgage rates, most lenders are protecting their margins, trimming costs and redirecting attention to where the growth is. And one of the clearest areas they are chasing is business and commercial lending. Several are expanding their teams and openly trying to increase their share of wallet with existing business customers. Others are leaning into refinancing with cashback offers, low risk owner occupier lending, and niche or specialised products, while pushing more of the process towards digital and automated decisioning.
For a business owner, this competitive reshuffle is genuinely useful. When lenders are actively hunting for quality commercial and business borrowers, the terms on offer to well prepared applicants tend to improve. It becomes a market where presentation matters, where a clean, well structured application can unlock sharper pricing and more flexible conditions than a rushed one ever will. The second tier and non bank lenders, which do not carry the same volume pressures, add further competition and often move faster on the deals the majors are slower to price.
It is also worth remembering that the advertised rate is only part of the story. Establishment fees, ongoing charges, offset arrangements, redraw flexibility and the way a lender treats your security can matter just as much to the total cost of a facility as the headline number. In a market where lenders are competing on more than price, there is often room to negotiate on those terms too.
Where we come in
The current backdrop, sticky inflation, a central bank leaning hawkish, and lenders actively competing for business borrowers, is one where a bit of strategy goes a long way. Sitting on a variable facility and hoping for cuts is a plan, but it may not be the best one available to you right now.
If you have finance maturing in the next year, an expansion you are weighing up, or you simply have not tested your current facilities against a “higher for longer” scenario, this is a good moment to run the numbers properly. We are always happy to sit down and map out how your borrowing would look under a few different rate paths, and to see whether the current appetite among lenders can be turned to your advantage.
If any of this has prompted a question about your own situation, reach out for a no obligation chat. Sometimes a short conversation is all it takes to work out whether a small change now could save you a meaningful amount later.
This article is general information only and does not take into account your particular objectives, financial situation or needs. It is not personal financial, tax or credit advice. You should consider your own circumstances and seek professional advice before making any borrowing or financial decision.
