The Reserve Bank of Australia (RBA) has announced a hold on the cash rate, keeping it steady at 3.85%. This decision bucked expectations, as many market watchers, including Australia's big four banks (ANZ, Commonwealth Bank, Westpac, and NAB), had anticipated another 25-basis-point reduction. This hold comes after two 25-basis-point cuts earlier this year in May and February, suggesting the RBA is taking a more cautious approach despite easing inflation.

A Balancing Act: Inflation, Employment, and the Economy

Think of the RBA as a master juggler. On one hand, inflation is finally behaving itself, sitting pretty at 2.7% – right within their sweet spot of 2-3%. Good news, right? But then there are the other balls in the air, and they're proving a bit tricky: 

• Jobs are still plentiful. Unemployment is holding strong at 4.1%, meaning plenty of people are working. That's great, but it also suggests there's still a lot of demand in the economy. 

• Wages are creeping up. Our pay packets are getting a little fatter (up 3.4%), which is awesome for us, but it can also push prices up. 

• House prices are already soaring to record highs. Another rate cut could throw more fuel on that fire, making it even harder for some to get into the market. 

• Cost of living still hurts. Even with inflation easing, the pain of everyday expenses is still very real for many Aussies, and the RBA is mindful of that. 

 

What does this mean for your business?

On a positive note, the NAB Business Confidence Index jumped significantly in June, showing renewed optimism among businesses. Sales, profitability, and employment are all up, especially in manufacturing and retail. This underlying strength likely contributed to the RBA's decision to hold rates. 

• Stability for Variable Loans. If your business has variable rate loans, you'll see a period of predictability in your repayments for now. 

• Review Your Strategy. Even with a hold, it's a prime time to reassess your finance. Are your current terms competitive? Could a refinance free up capital? 

• Invest with Confidence. With business confidence up and rates stable (for now), consider if now's the time to invest in new equipment, property, or expansion. 

The RBA is watching closely. For your business, this means staying agile. At Add Finance, we help businesses like yours navigate these market shifts. Let's discuss how today's RBA decision impacts your unique financial strategy. Connect with Add Finance today at addfinance.com.au to optimise your commercial finance.