The Reserve Bank of Australia (RBA) has increased the official cash rate by 0.25 percentage points to 4.85%, adding further pressure to households and businesses already managing rising costs.

This is the fifth interest rate increase in 2026, following rises in February, March, May and September, and takes the cash rate to its highest level since 2008.

The Melbourne Cup Day decision was widely anticipated following stronger-than-expected inflation figures. With inflation remaining above the RBA's target range, the latest increase is another reminder that borrowing costs remain a significant challenge for Australian businesses.

What this means for business owners

For a business with $500,000 in variable-rate borrowings, a 0.25 percentage point increase adds approximately $1,250 a year in interest costs, assuming the increase is passed on in full and the loan balance remains unchanged.

Across the five increases in 2026, that represents approximately $6,250 in additional annual interest costs on the same loan balance.

Higher interest rates can also affect your customers, reducing discretionary spending, slowing sales and putting pressure on debtor payments.

Four steps to protect your business:

• Review your borrowings: Check your current interest rates, loan balances and any fixed-rate loans approaching expiry.
• Update your cash flow forecast: Factor in higher interest costs and consider how further rate increases could affect your business.
• Protect your profit margins: Review your pricing and operating costs to ensure your business remains profitable.
• Stay on top of debtors: Follow up overdue invoices promptly and maintain healthy cash reserves.

The bottom line

Higher interest rates make cash flow management more important than ever. Taking action now can help your business remain financially resilient and better prepared for whatever comes next.

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Please also note that many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances. Should you have any further questions, please get in touch with us for assistance with your SMSF, business, bookkeeping and tax requirements. All rights reserved. Brought to you by RGA Business and Tax Accountants. Liability Limited by a scheme approved under Professional Standards Legislation.