Today’s decision by the RBA to leave the cash rate on hold comes as no surprise, given the lack of any meaningful data pointing to the economy continuing to overheat and further threaten inflation rises. In fact, National Accounts data released earlier in the month provided solid evidence that monetary policy tightening is having its intended impact on domestic demand. Gross Domestic Product (GDP) only grew by 0.2 per cent over the December quarter, and by 1.5 per cent through the year. On a per capita basis, GDP has been negative now for three straight quarters, indicating that we are in a ‘per capita’ recession.

CreditorWatch’s Business Risk Index (BRI) data for February 2024 continues to show a sustained trend decline in the average value of invoices that our customers are issuing. This decline trend began in the early months of 2021, but accelerated over 2023, mirroring the slowdown in economic activity that the National Accounts data revealed.

Trade payment defaults – that is, one business lodging a payment default for an invoice more than 60 days overdue – are also at record highs, indicating there are many businesses out there that are struggling to pay their bills on time. There is no doubt that many small and medium businesses, particularly in food and beverage, retail trade and construction industries, are doing it tough.

It is unlikely that these businesses will get any interest rate relief until the third quarter of 2024, given services inflation remains elevated and is only coming down at a slow pace. While interest rates remain at 4.35 per cent, consumers will continue to hold back on spending on discretionary items, and this will further negatively impact retail trade, but overall, will help bring inflation down.