From global tariffs to a likely August RBA cut, CreditorWatch’s latest economic update shows what’s ahead for Australian business owners.

Good news might be on the horizon for Aussie business owners. After months of uncertainty, business insolvencies have finally plateaued, and economists are tipping the Reserve Bank will cut interest rates in August, giving both consumers and small business owners a bit of breathing room.

That’s the big takeaway from CreditorWatch’s July Economic Update, with Chief Economist Ivan Colhoun saying last month brought a welcome break from some of the recent turbulence.

Rates held, but not for long

The RBA surprised pretty much everyone in July by holding the cash rate steady. But with inflation easing and the latest CPI numbers tracking right where the RBA wants them, Colhoun reckons the board will cut rates by 0.25 per cent at its August 12 meeting.

“Lower interest rates will be welcome news for consumers and businesses alike,” Colhoun says.

“We’re seeing signs that the economy is cooling in a controlled way, which is exactly what the RBA has been aiming for.”

Insolvencies are high but steady

Business insolvencies remain at elevated levels, but CreditorWatch’s B2B payment default data suggests a slight easing in recent months.

Colhoun puts that down to the mid‑2024 income tax cuts and cost‑of‑living relief from both state and federal governments.

“It’s still too early to see much impact from the earlier rate cuts in February and May, but together with another cut this month, they’ll help offset some of the global headwinds,” he says.

Tariffs and trade tensions

Speaking of headwinds, international trade is still dealing with some heavy baggage. The US has just signed new deals with the EU and Japan, locking in tariffs between 15 and 20 per cent. These were higher than many expected. While the market reaction was muted, Colhoun suggests these higher costs will eventually weigh on global growth and investment confidence.

It’s an alarm bell for Australian businesses, especially those in manufacturing and export, that higher prices for imported goods could be on the horizon, even as demand slows in key overseas markets.

Oil, politics and the global mood

July also brought a temporary lull in oil market volatility after tensions eased in the Middle East. However, the relief was short-lived. Prices spiked again by the end of the month off the back of fresh US–Russia conflict threats. On the bright side, US–China trade talks appear to be making progress, which could help settle markets in the months ahead.

Signs of relief?

Calhoun says conditions remain challenging for big and small businesses. However, the combination of stable insolvency rates, improving business confidence (especially in retail and manufacturing), and a likely August rate cut should give business owners greater confidence as they move into spring.

“Global factors like tariffs will continue to shape the landscape,” Colhoun says, “but right now, the focus for Aussie businesses should be on consolidating, keeping an eye on costs, and making the most of any uptick in consumer spending.”

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