The Reserve Bank's Monetary Policy Board meets on 28 and 29 September, and for the first time in a while every major bank is calling the same outcome: a rate rise. NAB, CommBank and Westpac are all forecasting a 25 basis point increase to 4.60 per cent, and ANZ expects a further move to 4.85 per cent by November. Markets are now pricing the September move at around 90 per cent likely.

Why now

The cash rate has sat at 4.35 per cent since August, but the case for holding steady has weakened. Annual trimmed mean inflation, the measure the RBA watches most closely, held at 3.6 per cent in July, above the top of the 2 to 3 per cent target band. Oil prices have also climbed sharply on the back of conflict in the Middle East, with Brent crude moving from around US$80 a barrel to above US$100, which flows through to petrol, diesel and freight costs. The RBA's own business liaison has reported many businesses are already passing higher input costs on to customers, and the RBA Governor has said some of the upside risks to inflation appear to be materialising.

What it means for your business

If your business carries a variable rate loan, overdraft or equipment finance facility, a 25 basis point rise adds to your repayments from your next billing cycle, and current commentary suggests any relief through rate cuts is not expected until 2027 at the earliest. That is a longer stretch of higher borrowing costs than many businesses had budgeted for.

What to check this week

  • List every business loan, overdraft, line of credit and equipment lease you hold. Note which are variable and which are fixed, and when any fixed terms expire.
  • Ask your bank or broker whether refinancing or partly fixing a variable loan suits your situation, rather than waiting for a rate rise to force the conversation.
  • Rebuild your cash flow forecast using the higher repayment figure, not last year's number.
  • If your suppliers are already passing on higher costs, check whether your own pricing has kept pace, or whether your margin has quietly been absorbing the difference.

The decision is announced at 2.30pm on Tuesday 29 September, with a media conference from the Governor an hour later. Nothing is locked in until then, but with the market this confident, it is worth having the conversation with your lender before the announcement rather than after.