Australia’s economy remains resilient despite high interest rates and costs with many small and medium-sized enterprises planning to grow and invest.

In its September Financial Stability Assessment, the Reserve Bank of Australia (RBA) notes that budget pressures from high inflation and interest rates continue to be felt across Australia but highlights that the share of borrowers experiencing severe financial stress remains small.

It says most businesses remain profitable, with cash flow pressures expected to ease in the near term. And it expects budget pressures to ease as inflation moderates further and Stage 3 tax cuts take effect.

“While a small but rising share of Australian households are falling behind on their mortgage repayments, the vast majority of borrowers continue to be able to service their debts and most have maintained, if not added, to their mortgage buffers,” it says.

“Many businesses also continue to manage pressure on their cash flows and balance sheets, supported by their strong financial positions prior to the rise of inflation and interest rates. Still, business conditions remain challenging for many firms, especially small businesses.

“Business insolvencies have increased sharply over the past couple of years following the removal of pandemic-era support, though they are only slightly above pre-pandemic levels as a share of all businesses.”

More businesses planning for growth

Yet, ScotPac’s latest research, released in October, reveals that many businesses remain optimistic. It found that 56% are projecting business enterprise growth by as high as 17% in the six months to March 2025. In contrast, 34% expect a decline in revenue of as much as 28%.

ScotPac found that mining and transport businesses were the most confident companies in its survey.

By state, Queensland businesses were the most optimistic with 84% anticipating revenue growth in the next six months.

Victoria firms showed signs of recovery. While 28% expect a rise in revenue, this was 60% higher than when they were last polled in 2023.

NSW businesses remain solid with 59% projecting revenue growth.

Given these growth expectations, ScotPac’s research picked up a surge in credit demand with 94% of businesses seeking new capital to fund their businesses over the next six months.

While 60% of businesses want to invest in their business over this period, 34% plan to raise new equity (up from 11% in 2014).

But despite plans for growth, ScotPac found that businesses are still hurting. Indeed, 49% said they have been “very negatively” affected by rising wages and super; 20% want new staffing laws and changes relaxed; and 18% name company tax cuts as top of their wish list.

Risks to growth remain

Businesses also report that their insolvency risks are growing as their cost bases rise and the Australian Taxation Office cracks down on tax debts. And just one in five businesses are confident of surviving the loss of a major supplier or client.

Only 21% believe they have adequate risk management strategies in place. That’s concerning, given that the RBA has warned of further risks that could harm Australia’s economic outlook. These include geopolitical and climate change risks and the possibility of massive technology outages and cyber-attacks. Also worrying is the weakness in the Chinese real estate sector.

“Stress on households and businesses would be magnified if economic conditions deteriorated further than anticipated and/or if inflation and interest rates were to remain high for longer than expected,” the RBA cautions.

However, it says the strong financial position of many businesses should help limit the risk of widespread financial stress if the economic environment deteriorates by more than expected.

Financial facilities to help business growth

If you’re planning to grow your business in the current economic climate, there are many challenges that prevent potential obstacles to success. With cash-flow pressures set to ease in the immediate term, it’s a good time to explore your options – and there are several funding options designed to help businesses remain stable and grow, even in challenging economic conditions.

Grow your business with ScotPac

ScotPac has been helping Australian businesses survive and thrive with fast and flexible finance solutions for decades. Our commercial funding options include:

All our facilities are designed with the needs of Australian business owners top of mind. Plus, they’re all completely customisable, so you can benefit from a tailored funding solution that suits your business’s needs.

To find out more about our Invoice Finance, Trade Finance, Asset Finance or Business Loan solutions or to discuss your goals for your business, get in touch with ScotPac’s lending specialists today.