Talking Cents

Your business accountant sharing within you some potentially great news

There have been some major developments that as your small business accountants in Sydney we think we should share with you.

Yesterday the Reserve Bank of Australia (RBA) announced it was slashing the official interest rate to 3.75%, down by 0.50%.

We now wait with anticipation to see what the big four banks will do. It would seem that they are most likely to not reduce their lending rates by the full 0.50% but will instead reduce their lending rates by a lesser percentage. No doubt, the banks will take their time in considering their decision, as is their standard policy.

From a small business focus, the reduced interest rate once passed on will flow into small businesses in a number of beneficial ways.

· Approximately one third of the population that are paying off mortgages will now have some more flexibility to spend their disposable income in a less penny pinching manner. For small local retailers this will bring some relief to their current predicaments and hopefully see rising sales where they have so far been flat at best.
· Small businesses that have been having difficulty paying off their debts will get some relief as their loan repayments fall in line with the reduced interest rates.
· The move by the RBA may inspire a more confident economy, thus prompting bigger businesses to invest in infrastructure projects which will ultimately flow into small business as well.
· Finally, if the banks do keep some of the margin for themselves then they may just relax some of their lending criteria for small business and free up funds for capital investment by small business. By doing so, small businesses then start feeding each other and the economy will gather pace, through the winter leading to a better Christmas trade.

So now that the RBA have moved to stimulate the economy, we now wait on the May Federal budget to see what the Federal Government can do to assist small business, whilst trying to keep to its "core" promise of keeping the budget in surplus, or as close to it as they can. Lets hope that Mr Swan can get all his ducks in a row and take steps that allow our entrepreneurial spirit to flourish, with all the benefits that it provides.