Small business group urges government action as RBA raises rates

The Council of Small Business Organisations Australia (COSBOA) said the Reserve Bank of Australia's decision to raise the cash rate by 25 basis points to 4.85% will tighten financial pressures on small firms. COSBOA chief executive Skye Cappuccio urged the upcoming Mid-Year Economic and Fiscal Outlook to include restraint on spending and steps to lower cost pressures, including a 25% cut in regulatory costs and a reduction in red tape.

"Government must start by not making things worse," Cappuccio said.

Cappuccio highlighted rising energy costs, proposed changes to discretionary trust taxation and the Digital Duty of Care Bill as additional burdens. She warned that small businesses are facing higher loan costs, reduced consumer spending and rising mortgage expenses, while inflation remains at 4.3%.

RBA Governor Michele Bullock acknowledged that the rate hike will likely feel like a recession to many Australians, noting that slower income growth and limited spending power could dampen economic activity. Bullock said the board remains committed to its dual mandate of low inflation and full employment and does not intend to push the economy into recession, though growth is expected to slow sharply.

HSBC chief economist Paul Bloxham estimated a 50% chance of recession, citing a cooling housing market and reduced consumer spending as key risks. He projected little to no growth in the fourth quarter of this year and the first quarter of next year, raising the possibility of a downturn.