Five RBA board members voted to raise rates. The cash rate is now 4.10 %. Here is what it means for small business owners right now.
What’s happening: The Reserve Bank of Australia has raised the cash rate target by 25 basis points to 4.10 per cent, in a split decision with five board members voting to increase and four voting to hold.
Why this matters: Employment Hero CEO Ben Thompson says businesses are already responding by favouring casual hires over permanent roles, a trend the rate rise is likely to accelerate.
The Reserve Bank of Australia has raised the cash rate by 25 basis points to 4.10 per cent, in a split decision that reflects the genuine uncertainty facing the Australian economy as inflation pressures build from both domestic and global sources.
The decision, announced on 17 March 2026, was made by a majority of the Board, with five members voting to increase the cash rate and four voting to leave it unchanged at 3.85 per cent, according to the RBA’s official statement.
The Board’s decision rests on two converging pressures. The first is domestic. The RBA said inflation picked up materially in the second half of 2025, with capacity pressures slightly greater than previously assessed, the unemployment rate a little lower than expected and labour underutilisation remaining at low levels. While growth in unit labour costs declined, business investment was above expectations in the December quarter.
The second is global. The conflict in the Middle East has resulted in sharply higher fuel prices which, if sustained, will add to inflation, the RBA said. Short-term measures of inflation expectations have already risen as a result.
“In light of these considerations, the Board judged that inflation is likely to remain above target for some time and that the risks have tilted further to the upside, including to inflation expectations,” the RBA said in its official statement. “It was therefore appropriate to increase the cash rate target.”
The Board also noted that credit remains readily available to both households and businesses, and that the full effects of interest rate reductions made in 2025 are yet to flow through to aggregate demand, prices and wages.
The Middle East factor
The RBA was explicit about the uncertainty created by the Middle East conflict, describing it as posing substantial risks in both directions. A longer or more severe conflict could put further upward pressure on global energy prices, push up near-term inflation and potentially impair supply capacity or embed higher prices into longer-term inflation expectations, the Board said. Higher prices and prolonged uncertainty may also reduce growth in Australia’s major trading partners and domestically.
The Board said it will pay close attention to developments in the global economy and financial markets as it assesses future decisions, alongside trends in domestic demand and the outlook for inflation and the labour market.
For small business owners, the rate rise arrives at a moment of already elevated caution. Ben Thompson, CEO and Co-Founder of Employment Hero, said the decision was not unexpected but will test business resilience.
“This is no surprise off the back of hotter inflation, but the decision to hike interest rates will test the resilience of Australian business owners,” Thompson said. “Businesses are already hedging their bets with casual hires over permanent roles, and consumer confidence is at its lowest since July 2023.”
Thompson pointed to Employment Hero’s latest jobs report data as evidence of the shift already underway. Casual hiring is up 9.4 per cent year on year, while full-time and part-time hiring are much lower at 4.2 per cent and 2.3 per cent respectively, according to Employment Hero data.
“Another rate hike, on top of the global uncertainty we’re already navigating, will only accelerate that caution,” Thompson said.
Workers waiting for security
The shift toward casual hiring has direct implications for workers as well as business owners. As employers hedge against uncertainty by favouring flexible arrangements over permanent roles, job seekers looking for stable, long-term employment may find the market less accommodating in the months ahead.
“Workers looking for job security may have to wait a little longer,” Thompson said.
The RBA said its monetary policy is well placed to respond to developments and that the Board remains focused on its mandate to deliver price stability and full employment. It will do what it considers necessary to achieve that outcome, the statement said.
For small business owners, the message from both the RBA and the Employment Hero data is consistent. The pressure is not easing yet, and the decisions made about hiring, investment and cash flow management in the coming months will matter.
The RBA’s official monetary policy decision statement was released on 17 March 2026. Employment Hero data and CEO commentary were provided independently in response to today’s decision.
Keep up to date with our stories on LinkedIn, Twitter, Facebook and Instagram.
