EP 026: Another Rate Rise to Australian Business Owners

What an expensive week it is to be an Australian business owner! 

It doesn’t seem to matter what way you look, the cost of living and operating a business is going up substantially.

If you are feeling the pinch, just know that you are certainly not alone.
It’s not all bad news though.

If your business provides products and services that help people save money and cut costs, NOW is your time to shine!

Both consumers and businesses are more open than ever to solutions to help them save money.

Heck, I’m thinking about developing a new service in which I will sit down with a business owner and show them how they can cut costs and be more efficient with their money.

But more on that another time.

In this week’s episode:
○ Another interest rate rise
○ Australia’s energy crisis

Prefer to listen or watch?

You can hear Grant and I discuss these topics in more detail on the podcast
Click here to tune in: https://linktr.ee/businessandinvestingcom

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WHAT HAPPENED

The RBA puts rates up again! 

In summary:

The RBA has lifted rates by 0.5% and has indicated there are more rate rises coming.

In simple terms If you have a $500k mortgage – the interest costs on that mortgage went up by $200 a month.

I don’t think anyone was surprised that rates went up.
Especially after being at such low levels due to the pandemic.

However…

I think many were surprised by the speed they went up in combination with the rising cost of living (myself included).

Until the RBA either wins its fight with inflation or pushes the economy into recession I think we can expect more rate rises to come.

Why is this important to Australian business owners?

I do think this last rate rise will change both consumer and business behaviour.

People will be much less likely to take on more debt and will start to tighten their belts in preparation for more rate rises.

I have personally spoken with 2 business owners this week who have changed their plans to grow as they are worried about more interest rate rises.

Even though they have great businesses they don’t want to increase their risk at the moment.

I think it’s smart at this time to prepare yourself and your business as if the economy is heading towards a recession… even if it isn’t.

You would rather be prepared for a downturn and not need it, than be underprepared and get caught out.

Personally, I am making sure I have strong cash buffers in place and am running a lean business.

Not only that…

I want to make sure I’m positioned to seize any opportunities that come from this period.

This time could also present some interesting and advantageous opportunities.

If people start panic selling good assets I want to be the one they are selling to! 

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WHAT HAPPENED

Australia’s energy crisis

In summary:

Get used to paying more to heat your house, drive your car, and run your life overall.

The combination of world events + an extra cold winter is sending the cost of energy through the roof in Australia.

The average consumer is expected to see a $250 per year increase in the cost of energy.

While green energy is certainly contributing to Australia’s energy demands it’s still many years off from replacing our dependence on fossil fuels.

Hopefully, this energy crisis will see more investment in going green!

Why is this important to Australian business owners?

What I want to make clear is these energy cost increases don’t appear to be short term.

You can expect to pay more for energy for the coming years, not weeks or months.

As a business owner, you need to make sure you are passing on these increased costs or, finding ways to bring down your power consumption.

If not, you can expect to see your margins compress.

Which is not something I would want for any business owner.

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FINAL THOUGHT

Your Feedback…

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If you enjoy watching or listening to them, please let us know.

DISCLAIMER:
All information we share is NOT financial or investment advice and is purely intended for entertainment and educational purposes only. Always seek professional advice before acting on any financial decision.