Annual CPI inflation rose to 4.6% in the 12 months to March 2026, according to the ABS. The pain isn't spread evenly, the largest contributors were housing, transport, and food and non-alcoholic beverages. Transport rose 8.9% over the year, while housing rose 6.5%.
And there's no quick end in sight. Inflation is expected to peak at 4.8% in mid-2026, with underlying inflation expected to remain above 3% until mid-2027.
The Double Impact
Inflation and interest rates often create a double impact. Costs increase while customer demand may slow. For small businesses, sustained monetary tightening causes a severe tightening of working capital by increasing debt-servicing costs for commercial loans and asset finance, and it dampens consumer demand as household budgets are squeezed.
The Hidden Profit Drain
For business owners, this is the uncomfortable part. Revenue can look stable while profit quietly falls. Subscriptions, software, merchant fees, insurance increases and small supplier increases can quietly reduce profit.
Who's Hit Hardest
According to ABS data, almost half of Australian businesses (46%) reported higher operating expenses, driven mainly by rising overheads (65%) and staffing costs (40%). Small businesses were disproportionately affected, reporting notable increases in both areas.
New research reveals almost one in four Australians cut back on spending with small businesses before anything else when money is tight, while half say they only support small businesses ‘if they can afford it.’
✅ 3 things you can do right now to improve your position
1. Switch to Rolling Cash Flow Forecasting
The most crucial step is implementing rolling 13-week cash flow forecasts. Static annual budgets are no longer sufficient or safe in a rapidly changing inflationary environment. Regular forecasting allows business owners to anticipate cash crunches weeks before they occur, giving time to negotiate extended payment terms with suppliers, adjust marketing expenditures, or restructure debt.
Smart businesses have moved to longer-term planning, using cash flow forecasting, scenario analysis and stress-testing their business models against different interest rate and demand outcomes.
2. Make Smarter Pricing Decisions (Don't Wait)
Customers may not love price rises, but a business that never adjusts pricing during inflation can quietly become unprofitable. Revenue growth is not enough, profit, margin, cash flow and debt levels matter more.
Waiting risks eroding margins while costs keep rising. Smaller, more frequent price adjustments tied to specific cost increases tend to be more sustainable than a single large catch-up rise.
3. Claim Every Government Incentive Available
The $20,000 Instant Asset Write-Off is now permanent from 1 July 2026. Small businesses with turnover up to $10 million can immediately deduct eligible assets costing less than $20,000.
Among the biggest Federal Budget announcements were the return of loss carryback provisions, new startup tax refund incentives, and the permanent extension of the instant asset write-off.
Professional financial oversight ensures that tax liabilities are legally minimised, cash flow is aggressively monitored, and all applicable government grants or energy rebates are fully capitalised upon.
If you have any questions please reach out to me at paul@congdonfuzi.com.au