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Finance Matters with George Shaheen #1

08 June 2022

It has certainly been an eventful few months.

New Government… High Inflation… Increasing cost of living… Petrol… Oil… Russia… Low Unemployment… Rising Interest Rates… Decreasing property prices… Shortages… Global Supply Chains… ATO Collections…

Cost of Living

Did you know…

  • Fuel prices have increased by 35% in the past 12 months, which is the largest annual increase since 1990
  • Building materials prices are 15% higher than 12 months ago
  • Motor vehicles, household furniture, computers and TVs are rising at the fastest pace in more than three decades 
  • Fruit and vegetable prices are almost 7% higher than 12 months ago
  • Cost of rent rose by 0.6% in the March quarter alone, which is the most substantial quarterly increase for over seven years

Whichever way we cut it, the cost of living has increased significantly over the past 12 months. 

"All indicators from 30 days to 6 months have been steadily increasing. This would suggest several increases are coming in coming months." 

Interest Rates

After delivering the first interest rate increase in over ten years, the RBA announced yesterday that the Official Cash Rate would increase from 0.35% to 0.85%. 

The reason for this increase is to curb inflation, and the market is expecting further increases in the coming months.

As commercial finance professionals, we turn our attention to the Bank Bill Swap Rate (BBSW or BBSY) to help guide our predictions for the next six months. Commercial loans exceeding $1m are often priced using BBSY and the bank’s margin. The BBSY rate provides the borrower with a rate for borrowing over various periods, starting at 30 days, up to several years. The rate is not directly linked to the RBA cash rate; however, it usually moves in a broadly comparable pattern. The BBSY / BBSW rate is determined by an open market and is common to all banks. Clients with smaller commercial loans, typically under $1m, are generally offered a simpler product based on a Business Lending Base Rate determined by the bank and a customer margin. 

We have been monitoring the BBSY / BBSW rate over recent months, and here are our key take-outs:

  • All indicators from 30 days to 6 months have been steadily increasing. This increase suggests several increases over the coming months. 
  • The six-month rate has now increased to almost 2.10%. This increase implies the market is anticipating the cash rate to move by a further 1.25% over the coming six months. 
  • The 1-year, 3-year and 5-year rates are now 2.62%, 3.35% and 3.65%, respectively. This suggests a steep increase in rates for the coming 12 month period, followed by 0.75% over the following 24 months and a nominal increase from years 3 to 5.

"If my banking career has taught me anything – cash is king."

How to be prepared

In some ways, many of us have been spoilt for over ten years as interest rates steadily decreased to record low levels. 

I still recall my father telling me to “pay down your debt” at a young age. Those who chose to pay down their loans over the past ten years will be well positioned as we move into the upcoming period of rising interest rates. In addition, you will have built equity in your assets and hopefully paid your debts down to a manageable level.

For those with larger debt facilities, our experts can ensure you are getting the best possible offer from your bank.

We have the following tips for our valued Ashfords customers:

  • If my banking career has taught me anything – cash is king. Ensure you aren’t running short, particularly if you are operating in an industry impacted by strained supply chains.
  • Be proactive with your tax position. The ATO is in collection mode and is now actively pursuing overdue debts. Engage with your Ashfords advisor to ensure your ATO liabilities are appropriately managed.
  • Consider the structure of bank facilities. Reach out to our Finance & Lending team for a free consultation.
  • Carefully manage your costs. Review your non-essential cost items.
  • Stay on top of your debtors.

A wise man once told me – “Out of adversity comes opportunity”. 

For those customers with sound business fundamentals, the upcoming period provides an opportunity to build even stronger relationships with your clients and suppliers. So focus on what your business does well and make sure everybody knows about it! 

We are seeing several clients asking for pre-approval to purchase property on the property front. With lending institutions conceding that the property market will soften over the next 12 months, some investors are readying themselves for the longer-term opportunity this presents. 

At Ashfords, we are passionate about helping businesses achieve their financial goals and building strong long-term relationships. So get in touch today for a no-obligation consultation by calling
9551 2822 or by visiting our website.


Financial Advice Disclaimer

This information is for general information only.

It should not be taken as constituting professional advice from the website owner. 

The author is not a financial adviser. You should consider seeking independent legal, financial, taxation or other advice to check how the website information relates to your unique circumstances.

Ashfords is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly by this website.

Annexure 1 – BBSW Rates

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What’s this new tax:

On 20 March 2024, the Victorian State Government introduced the Commercial and Industrial Property Tax Reform Bill 2024 ( The Bill is expected to become law and to take effect from 1 July 2024.

The Victorian Government, as announced in the 2023-24 Budget,  is progressively abolishing stamp duty on commercial and industrial property and replacing it with an annual tax.

The annual tax, to be known as the Commercial and Industrial Property Tax (CIPT), will be set at 1% of the property’s unimproved land value.

The tax will replace land transfer duty (stamp duty) that is currently payable on the improved value of the land when you purchase or acquire a commercial or industrial property in Victoria.

The new tax system will start to apply to commercial and industrial property if the property is transacted on or after 1 July 2024.


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