For most of the past year the working assumption around boardroom tables has been that relief was coming. The next move in the cash rate would be down, borrowing would get cheaper, and the main question was one of timing. The most recent run of data has complicated that story. The economy is proving more durable than many expected, and a firmer economy is precisely the kind that keeps upward pressure on rates rather than easing it.
None of this is cause for alarm. But it does change the calculus behind decisions many business owners are weighing right now, from how debt is structured to when to commit capital to growth. Here is how we are reading the current picture, and what it means for the choices in front of you.
The economy is still growing, and the Reserve Bank has noticed
The headline number that matters is growth. The economy expanded by 0.4 per cent in the June quarter and 2.1 per cent over the year (ABS, June quarter 2026), a touch above where the Reserve Bank had pencilled things in only weeks earlier. That may not sound dramatic, but context is everything. The Bank has spoken about a “speed limit” for the economy, roughly 2 per cent, being the pace at which activity can grow without reigniting inflation. Coming in above that estimate, however modestly, is the kind of result that keeps a further rate rise firmly on the table for the months ahead.
For anyone carrying variable-rate debt, this is the signal worth sitting with. The market spent much of the year pricing in cuts. It is now doing the opposite. The direction of travel has shifted, and the cost of money is more likely to edge higher than lower in the near term. That does not mean rushing into decisions, but it does mean the assumptions underpinning your budget for the next twelve months deserve a fresh look. A forecast built on the expectation of falling rates is worth stress-testing against a scenario where they hold steady or climb, even if only to confirm your business could absorb it comfortably.
Confidence is returning to the business sector
There is a more encouraging thread running alongside the rate story. After a soft first half of the year, business activity picked up noticeably through the middle of 2026, and sentiment has followed. Business confidence has climbed to a six-month high, with month-on-month improvements in activity recorded across both July and August. Expectations for future activity have recovered to levels last seen before the oil price shock earlier in the year. After a stretch of caution, that is a welcome turn.
The caveat is cost. The same firms reporting stronger activity are also reporting stubborn input cost pressures, driven by a combination of fuel prices and wages. Encouragingly, the share of businesses passing those costs through to customers remains relatively low compared with the share actually facing higher costs. That gap is doing a quiet service for inflation right now, but it also tells you something about margins. Many businesses are absorbing rather than recovering cost increases, and that can only continue for so long before it shows up either in prices or in profitability.
If your business sits in that group, this is a moment to think about working capital and headroom. Rising activity is good news, but growth consumes cash, and a firmer rate environment rewards businesses that are not caught short. Making sure your facilities can support a busier order book, rather than scrambling once demand arrives, is the kind of planning that pays for itself.
How households are holding up
The resilience of the Australian consumer has puzzled forecasters all year, and the latest data offers part of the explanation. Household spending has held up better than higher rates were supposed to allow, and a good chunk of the recent strength came from a single category: car sales rose 10.3 per cent, as households facing fuel cost pressures shifted toward electric vehicles. That is a specific story rather than a broad spending boom, but it speaks to a consumer who is adapting rather than retreating.
The deeper explanation sits in the labour market. The share of employed Australians holding more than one job has risen to 6.9 per cent, the highest in more than three decades of records (ABS, June quarter 2026). Just under 1.05 million people now hold a second job, a rise of 11.0 per cent over the year. Rather than cutting back as costs climbed, many households have topped up their incomes by picking up additional work. Strong demand for labour has made that possible.
For businesses, this matters in two directions. On the revenue side, a consumer who keeps spending is good for turnover, and that supports the case for investing in capacity. On the cost side, tight labour conditions and workers stretched across multiple roles point to wage pressures that are unlikely to fade quickly. Both belong in your planning for the year ahead, and neither is likely to resolve itself in the space of a single quarter.
Property is softening, but the slide is easing
The housing market rounds out the picture, and here the news is more balanced than the headlines suggest. Dwelling prices fell again in August across every state capital, over both the month and the quarter, with Sydney and Melbourne leading the declines. On its own that reads as a market under pressure. Look a little closer, though, and the pace of the decline is easing. August was the first month since April that the monthly rate of fall slowed, easing from 1.2 per cent in July to 0.9 per cent in August. Our view remains that the correction will settle at around a 7.5 per cent peak-to-trough decline, likely bottoming in early 2027, which would place it well within the bounds of past cycles rather than anything more severe.
The other detail worth holding on to is that regional markets are again outperforming the capitals. Prices in parts of Western Australia, South Australia and Tasmania remain above where they sat at the national peak earlier in the year. As in previous downturns, the pain is far from evenly spread.
For anyone holding commercial or residential property as security, or watching valuations ahead of a refinance, this combination matters. Values are drifting lower in the major cities, but the slide is orderly and appears to be approaching a floor. If a valuation sits at the heart of your next financing move, timing and lender choice can make a real difference to the outcome.
What this means for your next move
Pull these threads together and the message for business owners and CFOs is reasonably clear. The economy is growing, confidence is recovering, households are still spending, and the property correction is behaving itself. The trade-off is that this same durability keeps the cost of debt biased upward rather than downward for now.
On debt structure, this is a sensible time to revisit the balance between variable and fixed. We are not suggesting anyone rush to fix everything, because the right split depends on your cash flow, your appetite for certainty and the shape of your borrowings. But if a rising rate environment would genuinely strain your position, the value of locking in some certainty is higher today than it was a few months ago.
On refinancing, do not assume the window has closed simply because rates are firming. The margins between lenders remain wide, and the difference between a sharp deal and a lazy one can easily outweigh a move or two in the cash rate. A facility that suited your business two years ago may be quietly costing you now.
On expansion and asset finance, the question is timing. If you have been waiting for cheaper money before committing to equipment or premises, waiting may now cost you more, not less. Locking in terms while conditions are known has its own value when the direction of rates has turned.
And on working capital, a resilient consumer is good for revenue, but a firmer rate environment rewards businesses that carry appropriate headroom. Whether that means an overdraft, a line of credit or a more flexible facility, the aim is to fund growth on your terms rather than under pressure.
If you would like to run the numbers on your current facilities, or simply want a second opinion on how a further rate rise or two might land on your business, we are always happy to talk it through. Sometimes the most valuable outcome is the reassurance that your current structure is already the right one, and where it is not, there is usually time to act before the next move rather than after it. The businesses that navigate a turning rate cycle well are rarely the ones that react fastest. They are the ones that looked at their position early and gave themselves options.
The information in this article is general in nature and does not take your personal circumstances into account. It is not financial, tax or credit advice. Please seek advice tailored to your situation before making any decision.
