4 min read
QUICK SUMMARY
- THE DATA: June quarter GDP grew 0.4 per cent and 2.1 per cent through the year: modest, but better than the RBA expected.
- THE LIKELY MOVE: Markets and some economists now see a reasonable chance of a 0.25 percentage point hike at the 29 September meeting, taking the cash rate to about 4.60 per cent.
- THE COMMERCIAL IMPACT: Business loans, overdrafts, working capital facilities and commercial property loans may reprice quickly and increase pressure on cash flow.
- THE TIMING: Government borrowing costs have reached a 15-year high, so funding conditions are already tightening before the RBA makes its decision.
- THE FIX: Review your debt structure, stress-test repayments and speak with a broker before September 29: not after the decision lands.
Why The RBA Now Has What It Needs
Australia’s June quarter GDP result was not spectacular. However, growth of 0.4 per cent for the quarter and 2.1 per cent through the year was better than the RBA had expected.
That matters because the RBA needs to see enough economic slowing to bring inflation under control. The latest figures do not show a clear, broad-based slowdown. In plain English, the economy may be cooler, but it is not yet cold enough to remove the possibility of another rate rise.
The data also arrived alongside a sharp increase in Australian government borrowing costs. The 10-year government bond yield reached a 15-year high in early September, signalling that financial markets are demanding a higher return to lend money over the longer term.
As reported by the Australian Financial Review, the combination of stronger-than-expected national accounts and higher government borrowing costs has strengthened the case for the RBA to act at its 29 September meeting.
A 0.25 percentage point increase would take the cash rate to approximately 4.60 per cent.
That said, a September hike is not guaranteed. One stronger GDP print does not automatically make a trend, and some economists argue the composition of growth matters more than the headline number. The counter-view from Bushletter points to cautious households, weaker non-mining profits and the risk of overreacting to a single result.
The sensible conclusion is not to panic. It is to prepare.
Why Commercial Borrowers Feel Rate Rises First
Commercial borrowers can be more exposed to rate movements than they realise.
Business loans, overdrafts and working capital facilities are commonly priced on a variable basis. Their interest rate may move with the cash rate, a bank bill benchmark or the lender’s own funding costs. When those costs rise, the change can flow through to your repayments or interest expense relatively quickly.
Commercial property loans can also be affected in two ways. A variable loan may reprice directly after an RBA decision, while a fixed-rate facility or new loan may already reflect higher wholesale funding costs and bond yields.
This is particularly important for borrowers with several facilities. A business may have a commercial property loan, equipment finance, an overdraft and a separate working capital line. A rate rise can appear in each facility, rather than as one neat increase in a single monthly repayment.
It is a little like finding four small leaks in the same roof. Each one may look manageable, but the total damage can be significant.
Businesses seeking commercial property finance in Perth should therefore assess more than the advertised interest rate. Loan structure, repayment type, term, lender margins, covenants and refinance timing can all influence the real cost.
What A Hike Could Cost
The simple illustration is familiar. A 0.25 percentage point increase on a $600,000 mortgage could add approximately $91–$92 per month, depending on the remaining term and loan structure.
Commercial facilities require a slightly different calculation because many are interest-only, revolving or linked to changing balances.
For example, a 0.25 percentage point increase applied to:
- A $1 million commercial property loan would add roughly $2,500 a year in interest if the balance remained unchanged.
- A $500,000 working capital line would add roughly $1,250 a year if fully drawn.
- A $2 million combined debt position would add approximately $5,000 a year before considering lender margin changes, fees or further rate movements.
These figures are illustrative only. Your actual impact will depend on the amount drawn, repayment frequency, whether the facility is fixed or variable, and how the lender calculates interest.
For businesses with multiple facilities, SME lenders have warned that the annual increase can run into tens of thousands of dollars. That is not only a finance cost. It can affect stock purchases, wages, tax payments, equipment upgrades and the timing of expansion plans.
A business may remain profitable on paper while becoming uncomfortable in cash flow terms. That is why a rate review should examine the timing of money in and money out, not just the annual profit figure.
Five Moves Before September 29
STEP 1: KNOW YOUR RATE STRUCTURE
List every facility and identify whether it is fixed, variable, interest-only, principal and interest, revolving or subject to a review date.
Also note when fixed terms expire. A loan that looks protected today may roll automatically onto a higher variable rate later if you do not act before the expiry window.
STEP 2: STRESS-TEST AT 4.60%
Model the business using a cash rate of 4.60 per cent, rather than relying on today’s repayment figure.
Then go one step further. Ask what happens if revenue falls, a major customer pays late or an important expense increases at the same time. A strong stress test is not designed to predict the future; it is designed to show where the pressure points are.
STEP 3: REVIEW WORKING CAPITAL HEADROOM
Higher interest costs can squeeze cash flow before revenue has time to respond. This is especially relevant for businesses carrying stock, funding long payment terms or managing seasonal demand.
Review your available limits, current utilisation and upcoming obligations. If your facility is already close to its limit, explore your working capital options before the business reaches a genuine cash-flow emergency.
STEP 4: CHECK FIXED-RATE EXPIRIES AND REFINANCE WINDOWS
Do not assume a fixed facility will automatically remain competitive when it expires.
If you own or occupy commercial property, refinancing may still improve the overall position, even in a higher-rate environment. A review of the right commercial property loan in Perth should consider the full structure, including fees, loan-to-value ratio, repayment flexibility and lender appetite.
The same principle applies to equipment. If new machinery or vehicles are part of your next stage of growth, compare the cash-flow effect of asset finance with using available cash reserves.
STEP 5: TALK TO A BROKER BEFORE THE MEETING
Lender policy, credit appetite and documentation requirements can change quickly when rates rise.
Starting early gives you time to prepare financial statements, management accounts, tax information, lease details, valuations and explanations for any unusual figures. It also gives your broker time to compare structure rather than simply search for the fastest approval.
If you are searching for a commercial property broker near me, look for someone who will explain the trade-offs clearly and stay involved through the lender’s questions.
Risks And Transparency: What Could Change
The most obvious risk is that the RBA holds rates steady. The June GDP result was better than forecast, but it was still modest growth. The Board will also consider employment, household spending, inflation, credit conditions and the broader effect of recent property and business failures, including the continuing Bathla collapse.
There is also a risk in reacting too quickly. Fixing every facility may provide repayment certainty, but fixed loans can include break costs, limited flexibility or higher rates if the market later turns. Variable lending offers flexibility, but leaves you exposed to further increases.
The right answer depends on your margin, cash-flow resilience, business plans and risk appetite. A business preparing to sell, refinance or expand may need a different structure from one focused on preserving cash and reducing debt.
Do not assume every lender will maintain the same appetite if rates rise. Commercial valuations, serviceability assessments and sector-specific risk settings may become more conservative.
The aim is not to guess the RBA’s next move perfectly. It is to make sure your business can operate sensibly across more than one rate scenario.
Terms To Know
- Cash rate: The interest rate set by the Reserve Bank of Australia for overnight lending between financial institutions. It influences broader borrowing costs.
- Variable rate: An interest rate that can change during the loan term, often in response to market conditions, lender decisions or movements in benchmark rates.
- Fixed rate: An interest rate locked for an agreed period. It provides certainty but may reduce flexibility and can involve break costs.
- Working capital facility: Finance used to manage the timing gap between business expenses and incoming revenue, such as stock, wages or supplier payments.
- Serviceability: The lender’s assessment of whether a borrower can meet repayments after considering income, expenses, existing debt and a stressed interest rate.
The Baseline Difference
At Baseline Finance, we focus on the structure behind the rate.
Our advice is jargon-free, transparent and built around your personal goals, business fundamentals and tolerance for risk. We compare lender options, manage the paperwork and negotiate on your behalf, acting as a single point of contact from application through to settlement.
A rate rise may be outside your control. Your preparation does not have to be.
Contact Baseline Finance
Phone: 08 6108 3925
