On 17 March 2026 the Reserve Bank’s Monetary Policy Board raised the cash rate by 25 basis points to 4.10%. It is the second consecutive increase, following the move to 3.85% on 3 February. Two rises in six weeks is a clear change of pace; small business borrowers should treat it as a signal rather than a blip.
Why the Board moved
The Board pointed to three things. Inflation “picked up materially in the second half of 2025”. The labour market has tightened. And the conflict in the Middle East is driving fuel prices higher, adding to inflation pressure from a direction the Bank cannot control.
What the split vote signals
The decision was carried 5 to 4, with four members preferring to hold. That tells you the call was finely balanced. It also tells you the Board retains a tightening bias while the fuel shock works its way through prices. Read together, the message is that nothing about the next move is certain, but the risk currently sits on the upside.
What it means in practice
Three effects land on small business straight away. Borrowing costs rise again on variable-rate facilities. Consumer demand softens as households absorb higher repayments, which matters for anyone selling to households. And banks reprice risk, which can show up in margins, conditions and credit appetite even where the headline move looks modest.
The combined effect of the two moves is worth sitting with for a moment. The cash rate has risen 50 basis points since the start of February. For a business carrying meaningful variable-rate debt, that is a real change to the monthly cost base in a short space of time; it has arrived alongside the fuel cost pressure already flowing through freight and inputs. Cost assumptions set at the start of the year deserve a fresh look.
What to do now
- Reprice jobs and quotes that carry rate-sensitive input costs. If finance costs sit inside your pricing, last month’s assumptions are already stale.
- Review working capital facilities before they reprice. Know what your overdraft, trade finance and equipment facilities will cost at the new rate and when each one resets.
- Stress-test your cash flow at higher rates. Model the position if rates rise again; if the numbers only work at today’s rate, you want to know that now.
- Talk to your lender early. If covenant pressure or facility renewals are coming, the early conversation is almost always the cheaper one.
- Revisit which debt is doing useful work. Debt funding productive assets earns its keep; debt papering over structural cash-flow problems gets more expensive with every rise.
The decision record is published by the RBA at interest rate decisions.
Before you act
This update is general information only and is not financial advice. Your facilities, covenants and exposure are specific to your business. Check the official RBA statement and talk to your adviser or lender before making decisions based on rate movements.