Borrowers Remain Resilient, but the RBA Is Watching the Edges

The RBA’s assessment is not a signal that credit has become easy or risk-free. Rather, it says most households and businesses have so far managed higher inflation, elevated interest costs and softer economic conditions better than might have been expected. Arrears remain low overall, banks are described as well capitalised, and lending standards have generally stayed prudent despite strong competition in business lending.

For borrowers, the practical lesson is that “available credit” and “affordable credit” are not the same thing. A lender may still be willing to consider a loan, particularly where income, security and repayment history are strong, but the real test is whether repayments remain manageable if revenue dips, expenses rise or refinancing takes longer than expected.

The review is especially relevant for small businesses. The RBA notes that many firms remain resilient, but conditions are tougher in sectors such as hospitality, construction and transport, where margins can be exposed to wage, energy, materials and demand pressures. Smaller firms often have fewer cash buffers and may rely on secured lending or owner-backed arrangements, making careful planning around business loan options more important than headline rate comparisons alone.

There is also a caution around non-bank and private credit markets. The RBA does not see them as a system-wide stability risk at present, partly because of their relative size, but it does acknowledge that visibility is more limited than in the banking sector. That matters for borrowers because alternative finance can widen access to funding, yet terms, covenants, fees and refinancing pathways still need close scrutiny.

Before taking on new debt, households and business owners may wish to work through several general questions:

• How would repayments look if the interest rate were higher than expected?
• Is the loan term reducing cash-flow pressure now but increasing total interest over time?
• Are there seasonal, sector or customer concentration risks that could affect income?
• Would a balloon, residual or refinancing assumption still be realistic under weaker conditions?

Using repayment estimates can help make those trade-offs clearer, particularly where a business is comparing loan size, term and rate assumptions through a Business Loan Repayment Calculator. The RBA’s latest review does not suggest borrowers should stop planning, but it does reinforce the need to plan on today’s evidence, not on a hope that conditions will quickly become easier.