The survey revealed that 23% of small and medium-sized businesses are planning to decrease the number of credit cards they have, while 39% are considering increasing their usage. Additionally, 25% of businesses are planning to increase the number of credit cards they own, and 14% are intending to apply for a higher credit limit on at least one of their cards.
The CEO of Small Business Loans Australia, Alon Rajic, warns that using credit cards as a solution to immediate financial pressures or as a buffer can have long-term costs. Credit cards tend to carry much higher interest rates compared to other forms of finance, such as loans. The average credit card interest rate is around 20%, making it more expensive for businesses in the long run.
However, the survey also highlighted that two-thirds of small and medium-sized enterprises (SMEs) are exploring alternative payment methods like direct bank payments or EFTPOS to manage their expenses. While credit cards may provide temporary relief during challenging times, Mr. Rajic urges SMEs to consider the wider range of benefits offered by payment methods like EFTPOS and direct transfer when they have sufficient cash flow.
These benefits include lower transaction fees or no transaction fees at all, immediate settlement, simplified expense tracking, enhanced privacy and security, and no credit risk. Taking advantage of these benefits can ultimately lead to better financial management for small businesses.
The survey also revealed that businesses in Western Australia, Victoria, and New South Wales are more inclined to explore direct payment methods like bank transfers and EFTPOS in the next six months. This is likely due to the slowing business conditions across the country. The most recent NAB business survey result showed a decline of one point in July, and Westpac economists predict that there will be no significant improvement in business confidence in the coming months.
However, there is some positive news. According to Westpac economists, the Reserve Bank has likely finished its interest rate tightening cycle. Although there are still risks, particularly in the tight labor market, these are unlikely to warrant further tightening from the RBA in the near future. Inflation continues to ease, and growth outcomes indicate a sharp economic slowdown. These factors provide some relief for small businesses.
Further insight into the state of the Australian economy will be provided through upcoming wage data and job figures. Economists from JP Morgan expect the wage price index rise to be 0.9% quarter-on-quarter, resulting in an annual growth rate of 3.7% - the highest rate of growth in the past decade. The jobless rate is also projected to increase by 0.1% to 3.6%, with 5,000 jobs added and a stable participation rate.
