RBA Eases Rates, But Experts Warn on Deeper Issues for Business Growth

Australian small businesses will welcome the Reserve Bank of Australia’s (RBA) decision to cut the official cash rate by 25 basis points, offering much-needed breathing space for households and enterprises alike. However, leading voices warn that the rate cut alone will not solve the country’s deeper economic challenges, particularly the ongoing productivity crisis that continues to weigh down growth.

Gavan Ord, CPA Australia’s Business Investment Lead, emphasised that while the rate cut is a short-term relief, it falls far short of addressing Australia’s long-term structural issues.

“Today’s decision will be met with a sigh of relief from households and businesses who have been counting on another rate cut to boost their cashflow,” Mr Ord said. “After multiple rate rises, persistent inflation, and cost-of-living pressures, consumer and business confidence remain subdued. This cut should lift sentiment slightly and put a bit more money back into people’s pockets.”

Yet, Ord cautioned that interest rate changes alone cannot unlock Australia’s productivity potential. “Rate cuts will not get Australia out of its productivity straitjacket. Significant reforms are needed to move the needle on economic growth,” he said.

For SMEs, this signals an opportunity to stabilise cashflow, but it also serves as a reminder to plan for the long term. While the rate cut may ease the cost of financing for some businesses, it does not address critical issues such as regulatory complexity, sluggish innovation, and rising operational costs.

CPA Australia is urging governments at all levels to focus on meaningful reform. This includes reducing red tape, streamlining compliance, and fostering a more business-friendly environment. “We need to revitalise the business environment by removing unnecessary regulatory burdens and supporting entrepreneurship,” Mr Ord stressed.

Practical steps for SMEs include:

• Reviewing cashflow forecasts and exploring how lower borrowing costs might support investment or working capital.

• Staying informed on government reform announcements, as policy changes in areas like tax and regulation could have significant impacts.

• Investing in productivity improvements, such as technology upgrades or staff training, to ensure businesses remain competitive.

As the economy adjusts, the message is clear: while the RBA’s rate cut is a welcome reprieve, it is no substitute for the bold policy changes required to drive Australia’s long-term economic success. SMEs should take this opportunity to shore up their resilience—and prepare for the challenges that still lie ahead.

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