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RBA decision to provide desperately needed cash flow, says expert

Adrian Flores
Adrian Flores
01 September 2020 1 minute readShare
Patrick Coghlan

The RBA’s most recent cash rate decision should help small businesses by ensuring that cash stays in the economy for as long as possible ahead of the expected easing of government stimulus measures, says a credit reporting agency.

As was widely expected, the RBA decided to keep the official cash rate on hold at 0.25 of a percentage point.  

CreditorWatch chief executive Patrick Coghlan said the expected hold on interest rates is another sensible measure to ensure that cash stays in the economy as much as possible.

“This follows last month’s extension of the JobKeeper and JobSeeker schemes that demonstrate the extent to which the government is having to step in and support the economy,” he said.

However, Mr Coghlan was concerned that government support, in whatever form, will have to come to an end eventually, and when it does, there will be a seismic shock as companies have to fend for themselves or admit defeat.

However, he noted CreditorWatch’s recent data showing that there was a 15 per cent increase in credit enquiries in the first few weeks of August compared with the July average.

He believed this is an important indicator that businesses are starting to onboard new customers.

“While we can’t count on green shoots just yet, it’s my view that government stimulus packages should be eased off, where possible, to avoid just kicking the can down the road,” Mr Coghlan said.

With 10 per cent of all businesses in Australia in danger of failing because of lack of cash, Mr Coghlan said we could potentially end up seeing 10 years’ worth of administration in the next six months.

“Therefore, I urge business owners to seriously ask themselves if their companies are going to be viable, and if they’re unsure, they should seek advice sooner rather than later,” he said.

“Finance experts, restructuring specialists or bankers — they’re here to help.”

RBA decision to provide desperately needed cash flow, says expert
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Adrian Flores
Adrian Flores

Adrian Flores is the deputy editor of MyBusiness. Before that, he was the deputy editor for SMSF Adviser as well as features editor for ifa (Independent Financial Adviser), InvestorDaily, Risk Adviser, Fintech Business and Adviser Innovation.

You can email Adrian at [email protected].

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