The Reserve Bank of Australia lifted the cash rate to 4.85% on 3 November, its highest level since 2008, in a split 6-3 vote of the Monetary Policy Board. It’s the fifth increase of 2026, taking cumulative tightening this year to 125 basis points. The RBA’s full statement is available on rba.gov.au.
James Keene, Managing Director APAC at Employment Hero, says the decision lands at a difficult point for small business owners. “Today’s decision adds further pressure on Australian SMBs, who have now absorbed five rate rises this year,” he says. “Small businesses have proven resilient through a tough cycle, but higher borrowing costs are likely to make many owners more cautious about hiring and investment heading into 2027.”
What the data shows
Employment Hero’s own Jobs Report data, drawn from its payroll platform, shows SMB headcount grew 0.8% in September, the strongest monthly gain since May. The underlying trend is softer though: quarterly growth of 1.1% sits near its lowest point in two years, and annual wage growth dropped sharply, down to 2.2% from 4.5% in August.
“Businesses are still hiring, but they’re becoming more careful about where and when they add to their teams,” Keene says.
A framework for responding
Keene’s own prescription centres on productivity. Broken down into something an owner can actually act on, that comes down to three questions.
What’s the actual cash flow impact? Work out exactly how much a 25-basis-point rise adds to loan repayments or existing variable debt, in dollars, not just percentage terms. Many owners underestimate this because they think in rate terms rather than monthly cash terms.
What’s genuinely discretionary right now? Separate planned hiring and investment into what’s load-bearing, a role or purchase the business can’t function without, versus what’s opportunistic, growth bets made when conditions were easier. Rate rises are the moment to revisit the opportunistic list specifically, not freeze everything equally.
Where is time currently being lost to manual work? Keene’s point about productivity is really a point about where admin and manual processes quietly eat hours that could go toward growing revenue or holding headcount steady without added payroll cost. That doesn’t have to mean new software. It can mean a genuine audit of which repeated weekly tasks take disproportionate time.
What’s actually in your control
Keene frames this clearly: “With interest rates now at their highest level since 2008, productivity is the lever SMBs can control. Many are still held back by manual processes and admin that take time away from running and growing the business. Helping more SMBs adopt the right technology will be key to keeping them hiring through a tighter economy.”
The rate itself isn’t something any individual business can influence. What’s worth taking from this cycle is a habit, not a single fix: reviewing cash flow exposure after every RBA decision rather than only when repayments change, and treating “where is our time actually going” as a standing question rather than a one-off audit.