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The RBA’s rate cut could result in a $1.6 billion boost and increase in consumer confidence for NSW businesses, according to Business NSW.
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RBA rate cut hands NSW businesses $1.6bn lifeline
19 February 2025
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7 minute read
Following yesterday’s RBA decision, Business NSW has revealed this could inject almost $1.6 billion into the NSW business community, positively shifting sentiments.
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Business NSW predicted the 25 basis-point rate cut from 4.35 per cent to 4.1 per cent and outlined this would have the effect of reducing loan repayments for small businesses by almost $65 million annually.
Based on an analysis of RBA business finance data, the business body said a 25 bp rate cut could also unlock $1.5 billion or $124 million per month of potential spending by NSW households over the next 12 months.
Most of this would come from the reduction in monthly mortgage repayments, the body said.
Daniel Hunter, chief executive of Business NSW, noted the extra cash flow would be welcome to small businesses experiencing a lack of spending money.
“A cut will put money, albeit a modest amount, back into businesses’ pockets and allow them to potentially invest in jobs and improve operations,” Hunter said.
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“It’s a lifeline to help them cope with soaring energy, insurance and wage costs, which businesses across the state have told us are the top three issues contributing to negative business confidence.”
Hunter also said the interest cut would be a “crucial signal” to consumers that they could start spending more at their local businesses which fund a large part of the community.
The body also advocated for an interest rate cut based on ASIC data which highlighted that NSW was the only state to have experienced an average yearly rise in insolvencies since COVID-19.
According to an analysis of ASIC data in 2023–24, NSW recorded 42 per cent of Australia’s insolvencies, with only 34 per cent of the country’s businesses being counted.
From the period of 2022–23 to 2023–24, company insolvencies in NSW surged from 3,282 to 4,635, with 3,092 insolvency cases having already been recorded for the current financial year up until 26 January.
Hunter said with lower borrowing costs, businesses could regain financial stability and reduce the risk of insolvency.
“Anecdotal evidence from our members reveals many small business owners have been forced into finding second jobs to survive,” he said.
“This is backed up by ABS which revealed in January nearly a million workers are taking on second jobs to cover mortgage costs and keep the pantry full. Hopefully an interest rate cut heralds the start of improving business conditions and confidence.”
Data from the RBA also highlighted that 46 per cent of small business loan balances in Australia were residentially secured, underlining how the health of small businesses was critical to the economy.
Business NSW said it would advocate for both state and federal governments to support businesses with additional measures.
“The federal government’s recent industrial relations changes have added unnecessary costs. In the fight against inflation, small and medium family businesses can’t afford more union red tape.”
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