Why raising rates could kill the investment boom

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Why raising rates could kill the investment boom
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Bankers expect business credit growth to soften, but some economists warn that higher interest rates and rising costs will cause firms to slash their capital spending plans.

on his “confronting” assessment of Australia’s economic health, he’ll be deeply conscious of the risk that the country’s surge in business investment spending will fall victim to higher interest rates.

In its presentation for its half-yearly results, NAB disclosed that its business lending grew by 13 per cent in the year to March 2022. And it appears to have achieved its goals, with firms using a large proportion of the funds borrowed under this scheme in upgrading their capital equipment. “Most of the business owners we talk to need more labour so that they can put more products or services in the marketplace.”

“That’s because their revenues are fixed and their costs are variable, and Australian construction costs have been very inflated.According to NAB’s quarterly business survey, business confidence eased back in the three months to June, and is now back around long-run average levels.The survey found that confidence fell across all sectors, and states, except Western Australia .

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