Rates hold a partial release of the pressure valve for small business
4 Jul 2023|
Small and family businesses have received a welcome reprieve from the Reserve Bank’s aggressive monetary tightening campaign following today’s decision to hold the cash rate at 4.1 per cent.
Despite the decision to hold steady, the bank has signalled that it may continue to squeeze Australia’s economy further as it works to bring persistently high inflation under control.
“The RBA’s decision to leave the cash rate on hold will act as a partial release of the pressure valve for Australia’s 2.4 million small businesses,” ACCI chief executive Andrew McKellar said.
“The Reserve Bank has rightly kept the cash rate steady, giving it more time to assess the impact of its efforts to dampen economic activity.
“After experiencing 12 interest rate increases, declining consumer spending, and a surge in input costs, small and family businesses are being brought to their knees.
“To add to the pain, many struggling small businesses have seen their wages bill soar from July 1 as the annual wage review and increase to the superannuation guarantee have taken effect.
“While wages growth across the board remains within the central bank’s target range, the risk is that the Fair Work Commission’s determination becomes a floor for wage negotiations across the economy, thus unlocking the floodgates to deep and prolonged economic pain.”
The latest consumer price index data, released last week, revealed a significant deceleration in annual inflation despite the continuation of persistent price pressures in many sectors. Similarly, while the labour market has lost some momentum, it remains incredibly tight.
“Inflation is clearly easing, but much more progress will be needed to bring core inflation to levels that align with the Reserve Bank’s broader target range,” Mr McKellar added.
“To help curb inflation, continued discipline on public spending and tax policy from federal and state governments is required.