Thoughts Beyond Trump: Interest Rate Risk for Australasian Businesses
Many Australasian businesses have faced challenges and concerns following US President Trump’s tariff policies over 2025. For better or worse, these challenges will continue to evolve over 2026.
Even for businesses not exporting from Australasia to the US, the US trade policy backdrop will be vital to monitor. As witnessed in 2025, trade flows, domestic competition, and global financial markets will continue to be influenced by US policy shifts in 2026.
Table of Contents
- On this front, we are all in the same situation of waiting for “what’s next?”
- These comments and forecasts have implications for borrowers
- This leads to two critical questions for businesses
On this front, we are all in the same situation of waiting for “what’s next?”
In contrast to the uncertainty regarding global trade, there seems to be greater clarity regarding the economic landscape and related monetary policy and associated interest rate outlook in Australasia. The central banks of Australia (RBA) and New Zealand (RBNZ) have eased monetary policy over the past year to support economic growth. However, they now appear to be at the end of their easing cycles. From the respective cash rate peaks, the RBA has eased from 4.35% in December 2024, to 3.6% in December 2025. Comparatively, the RBNZ has eased from a 5.5% peak in mid-2024, to 2.25% in December 2025.
At the final meeting in December 2025, the RBA board unanimously voted to keep the cash rate on hold and sounded hawkish. With a wary eye on inflation, the RBA noted data suggested “some signs of a more broadly based pick-up in inflation, part of which may be persistent and will bear close monitoring”. In terms of what households and businesses worry about, and based on the RBA’s forecasts, one could interpret that the RBA’s core view is inflation is still a worry, and, in turn, the cash rate is at a low point for this economic cycle.
At the RBNZ’s final 2025 meeting in November, the RBNZ provided a steer that the official cash rate (OCR) was likely at a low point. The RBNZ said “future moves in the OCR will depend on how the outlook for medium-term inflation and the economy evolve”. Having cut the OCR, the RBNZ’s opening comments within the press release stated “economic activity was weak over mid-2025 but is picking up. Lower interest rates are encouraging household spending, and the labour market is stabilising. The exchange rate has fallen, supporting exporters’ incomes.”
These comments and forecasts have implications for borrowers
The RBA and the RBNZ are not signalling near-term increases in the cash rates they respectively control. Financial markets broadly concur with each central bank’s conclusions that the heavy lifting for the economy, achieved via lowering cash rates, has been delivered. However, those same market participants are inherently forward-looking, increasingly focused on the question of “what next?”. When will official cash rates rise? More critically for businesses, the key issue now, is how domestic interest rates are likely to evolve as economic activity gains momentum, and what that means for households and businesses alike? The answer, at this point, is “up”.
That process is fast and caught many flat-footed in late 2025. Wholesale and retail interest rates are facing renewed upward pressure as households and businesses, having waited for the bottom of the cycle, move to lock in borrowing terms amid increasingly hawkish signals from the RBA and RBNZ. It is not that either central bank is proposing to raise rates imminently. Rather, it is the reality that once a perceived low-point signal emerges, the window to secure favourable rates narrows rapidly as demand surges. Lingering inflation pressures are adding further upward momentum to interest rates.
A clear example of the ‘rubber hitting the road’ can be seen in the New Zealand mortgage rate. In the wake of the RBNZ’s November OCR cut, major banks have lifted fixed-term mortgage rates. Underscoring that, for borrowers, the cycle’s turning point may already be behind us.
Wholesale rates have been lifting on both sides of the Tasman. Moreover, if this recent rise persists, its effects will inevitably filter through to businesses and households, even as markets continue to price in a steady “on hold” policy stance from both the RBNZ and RBA in the months ahead. Notably, markets are now pricing in Australasian OCR hikes, rather than cuts, for 2026.
This leads to two critical questions for businesses:
- What is your interest rate strategy?
- What is your treasury policy?
If you don’t have a clear answer to these questions, now is the time to consider them and put appropriate strategies in place.
The call to action is clear; businesses should actively assess their interest rate exposure for 2026. Unlike global politics, which will remain a moving feast over the year ahead, interest rate risk is measurable and manageable with the right support and guidance.
If you’d like to discuss what any of the above may mean for your supply chain or business, please feel free to get in contact with Peter Kendall, CEO of Extolla, at contact@extolla.com