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Yesterday, September 29th, the Reserve Bank put rates up again. 4.60%. The fourth rise this year and the highest since 2011.
I don't normally write to you like this, but I've been doing this long enough to know when things are lining up the wrong way, and right now they are. I want you to hear it from me, straight, with the facts.
I also want to be clear up front - this isn't a doom message.
Periods like this are where a lot of wealth changes hands. The people who are prepared come out stronger. The ones who aren't, don't. This letter is about making sure you're in the first group.
Rates.
Four hikes this year. A lot of owner occupiers are now paying around 6.5%. The RBA blamed energy prices and the Middle East, and it's left the door open to go again and based off there current track record and the way they are dealing with the matter it is likely. Some of the banks are already tipping November.
Oil is part of that equation. When oil prices rise, the impact goes well beyond what you pay at the petrol pump. It feeds into freight, transport, manufacturing and the cost of moving goods across the country. If oil stays high, that inflationary pressure becomes harder to shake, and so does the case for keeping rates higher for longer.
Property.
National values have dropped five months in a row. Sydney is down about 7% from its peak, and the top end of Sydney and Melbourne is down more than 10%. Sales are down around 15% on last year and homes are sitting longer. All of that happened before today.
My view is we're nearer the start of this than the end. I wouldn't be surprised to see parts of the market finish 15% to 20% off their peak.
Tax.
May's Budget made the biggest changes to property tax in a generation, and they're now law. Negative gearing is gone for established properties bought after May 12th 2026. From July 1st 2027, those losses can only be used against rental income or future property gains, not your wage or business income. From the same date, the 50% CGT discount is replaced with inflation indexation and a 30% minimum tax on gains. Property you owned before Budget night keeps the old gearing rules, gains up to July 2027 keep the 50% discount, new builds are exempt and your home is untouched.
Investors didn't wait around. Investor lending fell more than 10% in the June quarter. Pull buyers out of the market as rates rise, and prices have nowhere to go but down.
Business.
Since July 1st, super has to be paid every payday instead of quarterly. The bill is the same. The breathing room isn't. The ATO is going easy in year one on anyone making a genuine effort. From July 2027, it won't. The Government has also announced a 30% minimum tax on discretionary trusts from July 1st 2028. Most family businesses in this country run through a trust.
More than 14,000 companies went under last financial year. Close to record numbers which is a sign of what is happening out in the market for businesses who are struggling. The ATO are no where near done and will continue to recover the massive outstanding ATO debts which are owed to them. Everyday our business sees this, so it is crucial to note.
Government and jobs.
Federal spending is sitting close to 27% of GDP. That's government pushing one way while the Reserve Bank pushes the other, and it means rates stay higher for longer.
Unemployment is 4.6% and climbing, and that number flatters us and is used to make everything seem ok. One hour of paid work in the survey week counts you as employed. Add the people who can't get enough hours and more than one in ten Australians in the workforce is either out of work or underemployed. Full-time jobs went backwards last month. Real wages have fallen four quarters in a row.
If you want to see what happens when all of this lands at once, look at Bathla.
One of Sydney's biggest home builders went into administration on August 25th owing about $3.4 billion. Around 2,000 homes were under construction. Up to 1,000 buyers have paid deposits on homes that have stopped. Subbies, suppliers and tradies are owed money they may never get back.
Its directors have blamed the Budget changes. Rising build costs, falling prices and new NSW building insurance rules all played their part.
Bathla made the news because it's big. The same pressure is sitting on thousands of smaller businesses right now, and most of the ones that go under in the next 12 months won't make the news. They'll just be gone. Bathla is the tip of the iceberg.
Every downturn in this country has created opportunity. Assets get cheaper. Competitors fall away. Banks pull back and leave gaps. People with cash, equity and a clear plan pick up what others are forced to let go.
There's support in the market too. Fewer homes are being listed, which is holding prices up in some areas. First home buyers still have government help at the entry level. And property has come back from every downturn we've ever had.
But "it always comes back" is worth nothing if you're forced to sell on the way down. The people who win in a market like this understand what's actually going on..
They have the right team and the right structure, and they don't leave things to the last minute.
Get your team right. An accountant who knows the new rules and knows your numbers. A financial adviser if you've got wealth to protect. A lender who understands your situation. People who tell you the truth early, while you can still act on it.
Check your structure. How you own property and run your business decides how much tax you pay, how protected you are and what you can borrow. What worked last year may not work next year.
Put money in your offset and save. Every dollar sitting there is a dollar you're not paying interest on, and it's there if things get tight.
Know when your loan expires. Don't let a facility run out on you. Check your maturity dates now. If one is coming up in the next six to twelve months, start working on it today, not the month before.
Have an exit strategy. Know exactly how your loan gets repaid when it matures. A sale, a refinance, a payout. And have a plan B, because in a falling market plan A doesn't always hold.
Don't wait. Book your accountant before BAS, not after. And don't make big decisions in a panic. Make them with the numbers in front of you and the right people in the room.
Front Financial is a private lender. We lend to business owners and the self-employed, secured against property, when timing or bank policy gets in the way.
If you're looking to pay out debt, call us first. That might be clearing an ATO debt before the penalties stack up. Refinancing a facility that's about to expire. Rolling several debts into one, with one repayment and a clear exit. Freeing up cash flow from the equity in your property. Or moving on an opportunity when the bank says no, or takes too long to say yes.
The equity you have today may be less in six months. If you need it, now's the time to talk.
Hold your seat, brace, and do whatever you can to survive, then get ready. The people who come through this prepared will be the ones who do very well out of it.
We're here when you need us.
Ryan Sweeney
CEO
This article is intended as general information only and should not be relied upon as financial, credit, tax or legal advice. Every situation is different. Before making any financial or commercial decision, seek independent professional advice that takes your individual circumstances into account.
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