A few months ago the talk among bank economists was that the Reserve Bank was done for the year and any relief would wait until 2027. That talk has stopped. The cash rate sits at 4.35 per cent after three separate rises earlier this year, and the board's next decision, due on 29 September, now looks more likely to be another increase than a hold.

Why the mood shifted

Governor Michele Bullock appeared before a parliamentary committee on 18 September and gave a noticeably firmer tone than earlier in the year. She pointed to the Middle East conflict, the AI investment boom and extreme weather as pressures pushing inflation risks the wrong way, and said businesses increasingly feel they need to pass on cost increases rather than absorb them. Trimmed mean inflation, the measure the RBA watches most closely, was still running at 3.6 per cent over the year to July, above the 2 to 3 per cent target band, and headline inflation was only a touch lower at 3.5 per cent.

What markets now expect

Ahead of the governor's testimony, traders were already pricing a solid chance of a quarter of a percentage point rise at the September meeting, which would take the cash rate to 4.6 per cent. After her comments, that expectation firmed further. Nothing is locked in until the board actually meets on 28 and 29 September, but the direction of travel has clearly turned.

What this means for your business

  • Do not bank on cheaper finance. If your cash flow forecast for the next year assumed a rate cut, rebuild it around rates staying where they are or rising a little further.
  • Revisit variable rate loans and equipment finance now. A further rise lifts repayments on business loans, overdrafts and vehicle finance almost immediately. Ask your bank or broker whether a fixed term suits your situation better than it did six months ago.
  • Expect suppliers to keep raising prices. If the governor is right that businesses are more willing to pass through cost increases, your own input costs are likely to keep climbing. Review your pricing and supplier contracts rather than absorbing every increase silently.
  • Keep a bigger buffer. With borrowing costs already elevated and unlikely to ease soon, a thin cash buffer leaves less room to absorb a late paying customer or an unexpected bill.

None of this is cause for panic. It is simply a reminder that the easy money era is not returning any time soon, and the businesses that plan around that reality now will handle 29 September, and whatever comes after it, far more comfortably than those hoping for a surprise.