As we step into 2025, the economic landscape is shifting, and small businesses (SMEs) must be prepared to navigate these changes. The latest Consumer Price Index (CPI) report reveals some important trends—especially around inflation, interest rates, and the job market—that could significantly impact your business.
Here’s how you can use the latest CPI data to plan and stay ahead:
Inflation is Slowing, But Costs Are Still Rising
Inflation is cooling down, with the annual trimmed mean rate dropping from 3.5% to 3.2%. This indicates that inflationary pressure is easing, but certain costs—like electricity—may still rise. In November, electricity prices jumped by 22.4%, mainly due to subsidies. While inflation is slowing, it’s important for SMEs to watch specific areas like utilities and labor costs.
Takeaway: Keep an eye on utility costs and be prepared for price hikes in certain areas, even as overall inflation eases.
Lower Rent and Housing Costs Ahead
Good news for businesses looking to expand! New house prices fell by 0.6% in November, and rents increased only slightly by 0.6%. This suggests that rent inflation could slow down in 2025 and 2026, which could be a relief for SMEs in need of office or retail space.
Takeaway: If your business is planning to relocate or expand, you might find more affordable options in 2025 as rent growth slows.
Food Costs: A Mixed Picture
Food inflation has slowed to 2.9%, the lowest since January 2022. However, prices for meals out and takeaways still saw a 2.6% increase, which may impact businesses in the food service industry. Keeping track of supply chain costs and adjusting pricing strategies will be crucial for businesses relying on food supplies.
Takeaway: Food and hospitality businesses may see slower food inflation, but they must manage rising supply chain costs carefully.
Tight Job Market: Focus on Hiring and Retention
Job vacancies have risen by 4.2%, suggesting that finding skilled workers could remain a challenge for SMEs. Despite low unemployment (3.9%), competition for talent is high, which could drive up wages. For SMEs, it’s important to factor in these trends when budgeting for hiring and retention.
Takeaway: Be proactive in retaining your employees and consider adjusting wage offerings to stay competitive in the tight labor market.
Interest Rate Relief May Be Coming
The Reserve Bank of Australia (RBA) may lower interest rates as soon as February 2025, depending on inflation trends. Lower interest rates could mean cheaper financing for SMEs, making it a great time to plan for growth or invest in your business.
Takeaway: Watch for potential interest rate cuts in 2025, which could reduce your borrowing costs and open up opportunities for business investment.
Go Global with Digital Solutions
As more SMEs embrace digital-first strategies, global expansion becomes more accessible. Tools like digital payment systems and mobile wallets are helping businesses manage cross-border operations with ease, opening doors to new markets and revenue streams.
Takeaway: Consider adopting digital payment solutions to make it easier for your SME to operate internationally and expand your business.
Full report here.
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