Business Hunter warns that the Reserve Bank Australia’s decision on Tuesday 5 May to lift the cash rate to 4.35 per cent could push struggling small businesses over the edge.
The Reserve Bank Australia has increased the cash rate by 25 basis points (0.25 per cent) to 4.35 per cent.
This is the third rate increase for 2026, following rises to 3.85 per cent in February and 4.10 per cent in March.
The cumulative jump from 3.60 per cent in late 2025 is straining businesses already grappling with softer consumer demand and rising operational costs.
Business Hunter CEO Bob Hawes warned the impact is immediate and severe.
“Small businesses across Australia collectively hold close to $200 billion in outstanding loans, and around $144 billion of that is on variable rates,” he said.
“Each interest rate increase flows straight through to cash flow, margins and jobs.”
Rising inflation makes it worse, as businesses can’t pass costs to price-sensitive consumers.
“The rate hike comes off the back of a steep rise in inflation, which puts increasing pressure on businesses constrained from passing on price increases,” Mr Hawes said.
In New South Wales, more than 8,800 businesses have entered administration since July 2024, marking two of the toughest years on record for businesses.
Early results from the latest quarterly Business NSW Business Conditions Survey suggest that business confidence is heading for its lowest point since 2009.
Mr Hawes stated that both state and federal governments should prioritise policies aimed at easing cost pressures on businesses.
“The NSW Government can act by abolishing the Emergency Services Levy, lowering the payroll tax rate below 5 per cent to be competitive with neighbouring states and restoring funding for small business support previously provided under Business Connect,” Mr Hawes said.
“Federal Government can contribute by reining-in unnecessary spending to relieve inflationary pressure, making the instant asset write‑off permanent in the upcoming Federal Budget, reducing the company tax rate to 25 per cent for all businesses and increasing the NSW allocation of regional skilled visas to address the skills shortage.
“These are practical steps that will help businesses stay open and keep people employed.”
As rate hikes tighten conditions, small businesses facing rising costs and weak demand risk collapse, highlighting the need for targeted government support to protect jobs.
For more business stories:
- BusNSW slams report into Newcastle’s privatised network
- Newcastle takes off with first Singapore flight
- Another charged over Pokolbin winery break-ins
Get all the latest Newcastle news, sport, real estate, entertainment, lifestyle and more delivered straight to your inbox with the Newcastle Weekly Daily Newsletter. Sign up here.
