SMEs on Alert: Nearly Half Hit by Interest Rate Strain, MYOB Report Finds

Small and medium-sized businesses across Australia are continuing to navigate choppy financial waters, as rising interest rates take a direct toll on operational costs and confidence levels. MYOB’s latest Bi-Annual Business Monitor paints a sobering picture where interest rate hikes have impacted 46% of Aussie SMEs over the past two years.

RBA Decision Surprises Business Owners

The Reserve Bank of Australia’s recent decision to hold the cash rate steady at 3.85% on 9 July came as a shock to many in the SME community, with expectations leaning toward a 0.25% cut. For businesses already managing tight margins and rising costs, the RBA’s conservative stance means continued pressure.

But while the hold offers temporary stability, many small businesses say it’s not enough. According to MYOB’s report:

• 21% of SMEs say a rate cut between 0.75% and 1.0% is necessary for real relief.
  
• 29% believe it will take more than a full percentage point reduction to see any meaningful impact on their bottom line.

“While this hold will offer an important pause for economic stability… SMEs once again demonstrate their resilience,” said Dean Chadwick, MYOB’s Chief Customer Officer.

Shifting Sentiment Across Sectors

The survey, which gathered responses from over 1,000 SME owners, reveals that business confidence has become increasingly sector-specific:

• Construction stands out as the most optimistic sector, with 33% expecting improved economic conditions over the next year.
  
• In contrast, retail and hospitality have taken a hit; confidence in these industries has dropped from 34% in December 2024 to just 14% in June 2025. Additionally, pessimism has increased, with a 10-point rise in businesses expecting a decline.

This shift reflects broader uncertainty in the economy and indicates a growing divide in how different industries are weathering the storm.

The Road Ahead: Watching and Waiting

While only 21% of SMEs expect the economy to improve by the end of 2025, the underlying message is clear: businesses are holding their breath, waiting for tangible relief in the form of rate cuts. In the meantime, the focus remains on survival and strategy.

For many, this is a critical moment to:

• Strengthen cash flow management
  
• Reassess debt and financing structures
  
• Leverage digital efficiencies to reduce costs
  
• Work closely with accountants and advisers to plan for resilience

“For accountants, the trusted advisers of SMEs, now is a key time to support clients with strategic planning around cashflow, debt management and cost control,” Chadwick advised.

Final Word

SMEs have proven time and again their ability to adapt in tough times. But as economic pressures persist and rate decisions remain unpredictable, staying informed and agile is more important than ever.

Whether you’re in construction, hospitality, retail, or running a service-based business, now is the time to double down on strategy, seek expert advice, and position your business to thrive, regardless of what the RBA does next.