The shock interest rate rise this week has had an impact on us all. SA Woman Annual Partner, Cheryl Cox of Finesse Tax & Business reached out to our SA Woman members in the community Facebook Group with her thoughts on making sense of the latest rise.
Check out the SA Woman Directory for a list of financial planners, brokers, advisors and experts to reach out to for support and head to the bottom of this article to get in touch with Cheryl and the team at Finesse Tax & Business Advisory.
Written by Cheryl Cox, Finesse Tax & Business
When it comes to today’s interest rate rise I really do feel like banging my head against the wall. Here’s my attempt to provide some context, understanding and support to you all in light of the RBA’s decision today to again increase interest rates
Why the increase?
The RBA is responsible for managing inflation which it does by increasing and decreasing interest rates. All the economic textbooks set target inflation in a steadily growing market economy at 3-3.5% per annum. This is what the RBA is trying to get Australia’s inflation back down to (we are currently under 7%).
Why don’t we want inflation to get out of control?
Best explanation is an example. In African countries where inflation runs rampant and their currency effectively becomes worthless (eg: it costs $100 for a loaf of bread). I once had a client from Zimbabwe hand me a one million dollar note, he joked about how they were all millionaires. This is of course the extreme but it is what the RBA are actively trying to mitigate.
Why is there so much anger over the interest rate increases?
There seems to be a great disconnect in the past 4-6 months between what the reality of our economy is for everyone and the RBA’s desire to reach the target inflation number. I have taken to imaging that they are just sitting there with the textbook open pointing at the 3% going “we must get this”.
It really feels like there isn’t an adult in the room right now.
I felt 3 rises ago was sufficient and we just had to wait to see how everything would settle. Now it seems likely we are going to have to navigate our businesses and lives through a massive over correction and hold our breaths for rates to be cut as soon as the RBA can see they have taken the economy too far. Most banks are expecting to see at least one rate cut by the end of 2023.
We are all likely to experience significant tightening and really have to examine our spending closely so we can meet the extra repayments on all of the debt we have. We may find it harder to sell our goods and services and you may find customers less likely to commit to contracts or longer term financial commitments. Sadly, I think it probably is going to get tough.
Everyone is in the same boat though and we are all going to have to ride this out. My advice is not to put your head in the sand about it though, be aware you may need to make quick financial decisions and if you’re going to find it tough reach out to your bank as soon as possible.
The silver lining is that this should only be for a short time and we have to hope that they know a lot the rest of us don’t and have their plan out of this.
So hold tight and reach out to your support. Use your accountants, financial planners and bankers to help you. Budget and plan.
Think about every time you were able to creatively pivot during COVID and use that energy again.
If you want help budgeting or planning your finances we’d love to help. You can book now
About Cheryl Cox
Cheryl is the founder and owner of Finesse Tax & Business Advisory. As someone who is strongly led by their values, Cheryl has always been passionate about supporting small businesses and the people at their heart.
Having spent 18 years in accounting, including three years as a partner in an Adelaide firm, Cheryl took the leap and founded Finesse Tax and Business Advisory in 2022. She leads an amazing and proactive team who are just as passionate about her clients’ success as she is.
Cheryl doesn’t just talk the talk – she walks the walk, too. She is an impassioned advocate for tax reform and small business; has been a trainer for the Tax Institute of Australia; trains and mentors other accountants and advisors; and is a recognised expert in complicated tax situations.
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