Do you know how interest rates affect your business?

In the Reserve Bank of Australia’s (RBA) latest public survey, they found that most Australians don’t know how interest rates affect inflation and the cost of goods and services.

This year has seen the RBA hike interest rates three times, with the market forecasting that rates might double in the wake of a reignited conflict in the Middle East.

We know it’s easy to lose interest in interest rates – so we’ve pulled the four most relevant questions from the RBA’s survey for employers to benchmark their knowledge about how interest rates affect their business.

How did you do? The RBA found respondents averaged at 50 percent accuracy with particular confusion about the relationship between interest rates and inflation.

The natural thought is that if interest rates increase, things costs more because businesses raise their prices to cover the rate hike.

However, this correlation isn’t entirely accurate and it’s an important inaccuracy for businesses.

When interest rates increase consumers are more likely to sit on their savings, while they accumulate interest, rather than draw funds from their saving account for that new pair of trainers or that holiday to Europe.

This trend reduces consumer demand and puts pressure on businesses to justify increasing the price of their goods and services.

Basically, because demand is lower, businesses struggle to increase prices, even if this would allow them to deal with higher interest rates.

So what does high interest actually mean for businesses?

The National Australia Bank (NAB) cites four challenges facing businesses dealing with hiked interest rates.

1. Less disposable income in their consumer base.
2. Decreased investment in small business.
3. Difficulty accessing credit.
4. Increasing costs.

The short story is that running a business gets trickier and passing this cost onto the consumer is more difficult.

This difficulty creates a series of HR and compliance issues for businesses who turn to cutting costs in their own workforce.

Hiring freezes, reduced hours, and redundancies can quickly become a reality for businesses facing financial challenges.

These decisions aren’t risk-free however. Changes to your workforce bring:

• redundancy costs;
• increased litigation risks
• loss of morale and talent;
• and compliance questions to answer.

It’s no mean feat dealing with an ever-changing, high-stakes economic landscape while also having to worry about your HR and workforce compliance demands.

That’s where Citation Group steps in. We offer HR support so that you can focus on growing your business while our team manages your compliance and workforce management needs, all backed by our experienced in-house legal team. Let us answer the RBA’s quizzes for you so you can focus on the important stuff.

If you’re looking at making changes to your workforce and want to follow a process that holds up to scrutiny, then you should sign up to our free webinar “We need to talk about redundancy” taking place August 5th.