On 20 May, the Reserve Bank of Australia (RBA) announced a 0.25 per cent cut to the official interest rate, which will come as a relief for many households and small businesses such as cafés.
The official interest rate is now 3.85 per cent and marks the second cut in 2025. A reduction in official interest rate can benefit small businesses in many ways, including improving cash flow, encouraging consumer spending, and making borrowing cheaper.
However, Gavan Ord, Business Investment Lead at CPA Australia, one of the country’s leading professional accounting bodies, says the cut won’t solve the underlying structural issues holding the economy back.
“Today’s decision will be met with a sigh of relief from households and businesses who have been counting on another rate cut to boost their cashflow,” Gavan says.
“After multiple rate rises, persistent inflation and cost-of-living pressures, consumer and business confidence remain subdued. This cut should lift sentiment slightly and put a bit more money back into people’s pockets.
“But rate cuts will not get Australia out of its productivity straitjacket. Significant reforms are needed to move the needle on economic growth. We need to revitalise the business environment by removing unnecessary regulatory burdens and supporting entrepreneurship.”
CPA Australia is calling on federal and state governments to prioritise policies that support business investment and innovation, including reducing red tape and initiating public discussions on substantive tax reform.
“If governments can shift away from regulation as the default response to every problem, and instead embrace practical solutions like education and better enforcement of existing laws, this will go a long way to creating the business-friendly environment that is so crucial to Australia’s economic success,” Gavan says.
